Natural gas tax foreseen by October
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With Harrisburg's Senate Republicans tentatively on board with a new tax on the extraction of natural gas from the massive Marcellus Shale formation, Gov. Ed Rendell announced Tuesday that the state would have severance tax legislation in place by Oct. 1.
Even opposition within the energy community has softened -- among the gas drillers, many companies are now amenable to a tax, or at least recognize that a tax is inevitable. Do it now, the thinking goes, and the terms will be more favorable -- wait until the impending 2011 budget meltdown, and legislators will be more likely to soak the industry to fill the budget shortfall.
In the last week, Senate Republicans have indicated in that they'd agree to a severance tax on natural gas as long as the governor and the rest of the Legislature complete the state budget on time. On Tuesday, the governor and legislative leaders announced that a budget deal had been struck in principle; the deadline is tomorrow, July 1.
If the budget is on time, Senate Republicans say, they are willing to negotiate a new tax on Marcellus Shale extraction in the autumn, when legislators return from summer recess. Gov. Rendell says such a tax, in place in 28 other states, could net $100 million or more a year.
Senate Majority Leader Dominic Pileggi, R-Delaware, told reporters at this week's Pennsylvania Press Club luncheon that "there's a growing recognition in our caucus -- and we expressed it openly last year during budget discussions -- that there should be a tax on Marcellus Shale extraction."
His caucus still has questions about the actual set-up of the tax, and also wants a significant portion of the new revenues to be steered to the municipalities where the wells are located, rather than directly to the general fund. But those details will be hashed out in the coming months; the impending budget will instead include only a requirement that a gas tax be enacted by a specific date.
The energy industry, through the Marcellus Shale Coalition -- a trade and lobbying group -- has resisted a tax, saying it would be a jobs-killer during what is a developmental stage in the industry. But seeing the writing on the wall, the coalition has been working with legislators on a bill that would include some favorable loopholes, preventing the taxes from taking effect for several years, and exempting certain low-producing wells from the severance tax, too.
"The devil is really going to be in the details," said Michael Wood, Pennsylvania Budget and Policy Center research director. Last week, the center -- which estimates that the lack of a severance tax has already cost Pennsylvania $62 million -- urged the Legislature to eliminate those loopholes.
Also at that news conference was state Rep. David Levdansky, D-Forward. On Tuesday, he expressed his discomfort with the promise of action by Oct. 1. "Frankly there's no good reason not to do it right now," he said.
First Published June 30, 2010 12:29 am
