Pennsylvania Independent Oil & Gas Association Pres. Dan Weaver said that Gov. Tom Wolf’s (D) proposal to include a 6.5% natural gas severance tax in the Keystone State’s fiscal 2017-18 budget ignores a fundamental reality.
“Low energy prices that people across the state are enjoying continue to translate into very difficult times for gas producers that would be made far worse with an additional tax burden,” Weaver said on Feb. 7 after the governor delivered his budget address to lawmakers in Harrisburg.
A severance tax would raise $382.4 million, according to the proposed budget which has tax revenues totaling a projected $33.29 billion. Wolf has called on state legislators to enact a gas severance tax before.
“This is the same market reality that existed during the last discussion about imposing an additional tax on natural gas production, and that will exist for the near future,” Weaver said. “This market reality means that a 6.5% severance tax rate would have a huge detrimental impact on natural gas development and jobs, while raising very little revenue to make even the slightest dent in Pennsylvania's current and projected budget deficits.”
He said the Appalachian basin is mired in a long-term negative gas pricing environment that has a potential to be reversed only with significantly more pipeline capacity that will take at least a few years to achieve under a best-case scenario.
“Pennsylvania's current unconventional drilling rig count of 33 is about one-third more than Ohio’s 21, while West Virginia continues to struggle, in part due to that state’s additional severance tax that was enacted a few years ago,” Weaver said.
“The best that can be said is that we are holding onto our rigs and our jobs by our fingernails by being as smart and efficient as possible in our operations,” he said. “All of that will change for the worse with any type of severance tax, without any significant effect on reducing the state budget deficit.”
Contact Nick Snow at [email protected].
