Marcellus Shale gas tax still faces significant hurdles
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HARRISBURG -- Two issues are making it tough for legislators to fulfill their pledge to enact a Marcellus Shale gas tax by Oct. 1.
And while there are only two, they are big ones:
• What kind of tax rate should be placed on the thousands of cubic feet of gas that drillers are extracting from the deep, underground areas of shale?
• How should the $100 million or more per year that such a tax would generate be divvied up?
"The House and Senate committed themselves to pass a Marcellus Shale tax by Oct. 1," state Rep. Bob Freeman, D-Northampton, said Monday at a news conference. "We urge the Legislature to honor that commitment. Gas industry drillers should pay their fair share."
When the 2010-11 state budget was enacted in early July, Gov. Ed Rendell and the Legislature said they would have the new Marcellus Shale gas tax in place by Oct. 1, and have it take effect in January. But there are only nine session days left before that deadline arrives, and major hurdles remain.
Mr. Rendell favors the type of two-phased severance tax used in West Virginia, where there is a 5 percent tax on the value of the gas that's extracted, plus a levy of 4.7 cents per mcf, or 1,000 cubic feet of gas pumped out. He hopes that would raise about $100 million a year, and this year wants to use $70 million of it to help close a $282 million gap in the state budget.
Rep. David Levdansky, D-Forward, prefers to impose a 35-cent fee on each 1,000 cubic feet of gas produced, which he thinks would raise up to $200 million a year. House Bill 1489 has been introduced to do that.
But some gas industry firms prefer the approach used in Arkansas, putting a 1.5 percent tax on the gas pumped out of the ground, for the first three to five years, while the gas industry is getting started here.
Democrats, who control the House by a 104-99 margin, met for two hours Monday in a closed party caucus to count noses for a shale gas tax. It would take at least 102 members of the 203-member House and 26 of the 50 senators to enact it.
Besides a clash over how to structure the shale tax, there are disagreements over how to spend the revenue. Environmental groups want significant funds spent to protect streams and underground water supplies from contamination by the chemical-laden "fracking fluid" that is pumped underground to free the gas.
First Published September 14, 2010 12:00 am
