Energy, manufacturing firms urge Pa. House to reject severance tax

Aug. 10, 2017
Energy and manufacturing association officials are urging Pennsylvania’s House of Representatives to reject a tax package that includes both a severance and use tax on natural gas that the state’s Senate narrowly approved 2 weeks ago.

Energy and manufacturing association officials are urging Pennsylvania’s House of Representatives to reject a tax package that includes both a severance and use tax on natural gas that the state’s Senate narrowly approved 2 weeks ago (OGJ Online, July 27, 2017).

“There’s an old saying in the theater: Don’t read the stage directions,” Pennsylvania Manufacturers Association Pres. David Taylor said during an Aug. 8 teleconference with reporters. “We’re resolved to do what’s necessary to convey the actual truth that putting new taxes on the natural gas industry will harm Pennsylvania.”

Pennsylvania Chamber of Commerce Pres. Gene Barr said, “We realize this commonwealth has had problems for many years, especially with its pension system. But a second piece that concerns many of us is Pennsylvania’s lackluster economic performance, which reduces revenue. One real asset Pennsylvania has is its energy. The opportunities it has presented and the economic benefits it has provided shouldn’t be ignored.”

Stephanie Catarino Wissman, executive director of Associated Petroleum Industries of Pennsylvania, an American Petroleum Institute affiliate, said, “This is a backward approach that jeopardizes thousands of jobs. Already, reliable energy has provided a significant $1,300/year boost to the average Pennsylvania household. The Senate’s bill places businesses in the commonwealth at a disadvantage. The main question is whether Pennsylvania wants investment and growth here, or elsewhere.”

Marcellus Shale Coalition Pres. David Spigelmyer said, “We believe this tax would deny Pennsylvania the opportunity to attract new businesses with some of the least expensive energy in the country. It’s also one of our most significant economic development tools to produce new jobs and revenue. The natural gas industry here has been under tremendous pressure from a lack of infrastructure. It also is under heavy pricing pressure.”

Pennsylvania Independent Oil & Gas Association Pres. Dan Weaver said, “Many of my association’s members are family businesses which have been around for 4-5 generations. With this act, there would be less capital investment, but it wouldn’t stop there. Many of our producers buy supplies from local manufacturers, so the benefits trickle down through our communities. If we don’t change our approach, we’ll start sending our jobs elsewhere.”

‘Difficult choices’

“Our association is a trade group of electric and gas utilities in the state. We understand that solutions often are difficult choices,” said Energy Association of Pennsylvania Pres. Terry Fitzpatrick. “At the same time, any solution has to spread the burden around. The gross receipt tax proposals don’t spread the burden equally. Users of natural gas would pay. Users of heating oil wouldn’t.”

Industrial Energy Consumers of Pennsylvania Treasurer Mark Chasse said his association’s members provide 35,000 jobs and invest as much as $300 million/year each in their facilities. “This tax would give them second thoughts. As our association sees it, it would be a $400 million/year hit and cause competitive disadvantages for some of our members,” he warned. “Since the 2008 economic downturn, energy suppliers have provided stable prices which have generated economic growth opportunities.”

Spigelmyer said, “Policies matter. This is another shot across the bow for an industry that has endured a lot already. It takes longer to get a permit here than in many of our neighboring states. Noble Energy and Anadarko Petroleum both decided to leave. Downstream, we may have landed Shell, but we lost Braskem, which was thinking of investing in Philadelphia.”

Manufacturing added $85 billion to Pennsylvania’s economy in 2015 and employs many people directly and along the value chain, Taylor said. “Remember, the Marcellus shale was discovered in 2008 so we’re just beginning to stand up with it. Pennsylvania’s corporate tax problems, on the other hand, goes back for decades,” he said. “This new tax is an example of the old thinking that should not be allowed to win the day.”

Barr observed, “There still are fundamentals that need to be addressed such as our high corporate tax rate that isn’t as high in states like Texas. Keep in mind that we have an impact fee. Whether it’s called a fee or tax is semantics. Companies don’t look at taxes in a vacuum, but in totality. Pennsylvania’s totality is high.”

Wissman said, “At API, we take every severance tax proposal seriously. I’m tired of talk that the energy industry here can take a severance tax. Capital is movable. Companies will look at economic realities, and the uncertainty here in Pennsylvania is discouraging capital investment.”

Contact Nick Snow at [email protected].

About the Author

Nick Snow

NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.