A severance tax and other election-year proposals potentially could dismantle Pennsylvania’s unprecedented natural gas production growth, the Pennsylvania Independent Oil & Gas Association’s president warned.
“From severance tax proposals of 5-10% to legislation to retroactively impose a $3 million/well ‘fee’ for every well that has been drilled on state forest land, it appears that some elected officials want to scrap the effective policies and regulations that have allowed Pennsylvania to become the second-largest natural gas producer in the US in 5 short years,” PIOGA Pres. Louis D. D’Amico said on Sept. 4.
The proposals have come from Keystone State politicians from 2014 Democratic gubernatorial nominee Tom Wolf to members of the state’s General Assembly from both parties, he said.
“With natural gas production at an all-time high, a reasonable 5% severance tax would generate over $1 billion in 2015,” Wolf said in a Sept. 2 blog. The amount could make up to $1.5 billion available for Pennsylvania’s public schools by 2018-19 if the levy was enacted, he added.
Calls for a severance tax ignore the large amount of revenue producers generate for the state’s tax base, D’Amico said. “Pennsylvania’s gas industry is paying more than its fair share of taxes, including an estimated $2 billion in state and local taxes since 2007 and more than $630 million in impact fees in just the past 3 years, with much of that money being directed to rural communities that have long been neglected by Harrisburg lawmakers,” he said.
“The fact is that if any other sector of our economy was moving into the Commonwealth with that level of investment and accompanying tax payments, policymakers would be throwing incentives and tax holidays at their feet, not looking for new ways to tax them in new ways or at a higher rate than every other business in the Commonwealth,” D’Amico continued. “Our industry does not demand incentives such as tax-increment financing, and relies solely on private capital to make energy development a reality.”
Other US shale plays competing for financing are in states with a better tax climate than Pennsylvania, which has the nation’s highest corporate net income tax, the PIOGA official said. “These misguided proposals will result in fewer companies coming into Pennsylvania to drill wells, and more companies looking to reduce their level of investment here,” he stated.
“Producers in Pennsylvania are already struggling with complicated and changing state regulations that increase the cost to operate, and lower commodity prices due to a lack of pipeline infrastructure to get natural gas to market,” D’Amico said. “A number of producers have cut back their drilling operations due to these substantial disadvantages, and these anti-industry measures would be another strike against our state's ability to remain competitive.”
Contact Nick Snow at [email protected].
