Pennsylvania Gov. Tom Wolf proposed a $29.9-billion budget on Mar. 3 that includes $2.5 billion of net tax increases for fiscal 2016, including a 5% severance tax on natural gas.
Since taking office in January, Wolf has visited schools, saying revenue from gas taxes would increase public education funding. The state faces an overall $2.3 billion budget deficit.
In December, the Pennsylvania Budget and Policy Center calculated a 5% severance tax could deliver $1 billion in revenue. Natural gas industry representatives disputed the number, saying it was too high.
They cited lower prices being paid for natural gas, and the fact that Pennsylvania operators receive less because of their inability to get gas to pipelines.
The PBPC revised its estimate, stating that in 2015-16 a 5% severance tax would yield $675 million at a gas price of $2.67/Mcf. A current state impact fee on gas generates an estimated $270 million.
David Spigelmyer, president of the Marcellus Shale Coalition, and Lou D'Amico, president of the Pennsylvania Independent Oil & Gas Association (PIOGA), both have said previously that the state's impact fee, enacted in 2012, is working.
They have suggested a severance tax would lower investment by the industry in the state.
Spigelmyer noted Mar. 3 that, "Natural gas development in the commonwealth continues to be an absolute game-changer for each and every one of our 67 counties, bringing about positive progress and broad-based benefits to all Pennsylvanians."
He said higher energy taxes on an industry already generating "substantial tax revenue for state and local governments" would undercut Pennsylvania's competitive position to attract investments."
He said, "We remain laser-focused on working collaboratively with the governor as well as the general assembly to help advance policies that seek to grow and expand opportunity. However, now is the absolute wrong time for onerously higher energy taxes, which threaten jobs and Pennsylvania's long-term competitiveness as well as our manufacturing potentials."
D'Amico has noted the gas industry was the "only extractive industry being targeted for a severance tax."
"We've been through this before," D'Amico said of earlier severance tax proposals, adding PIOGA opposes a tax that will put 250,000 jobs at risk or jeopardize in Pennsylvania. "We fight to protect the 20% of our nation's natural gas supply coming from Pennsylvania," he said.
Pennsylvania Sen. Ryan P. Aument (R) issued a statement on Mar. 3 in reaction to the governor's proposed 2015-16 state budget.
"We cannot ask our friends and neighbors to hand over even more money in the form of enormous tax increases without first fixing the structural deficit problems in the state budget," Aument said.
"When dealing with complex problems…simply throwing money at the problem will not solve anything. In this case, calling for crippling increases to broad-based taxes in order to pay for massive increases in state spending will only make these problems more difficult to solve in the future."
Aument said he suspects the final budget approved by the General Assembly "will differ substantially" from Wolf's proposal.
*Paula Dittrick is editor of OGJ's Unconventional Oil & Gas Report.