Pennsylvania governor renews call for lawmakers to pass severance tax

Pennsylvania Gov. Tom Wolf (D) renewed his request to the commonwealth’s legislators to enact a severance tax, arguing in his Feb. 6 budget address that it would be paid “by people mostly outside of Pennsylvania to use our natural resources” to support state programs and improve the economy.

This story was updated with comments from Pennsylvania's DEP on Feb. 9.

Pennsylvania Gov. Tom Wolf (D) renewed his request to the commonwealth’s legislators to enact a severance tax, arguing in his Feb. 6 budget address that it would be paid “by people mostly outside of Pennsylvania to use our natural resources” to support state programs and improve the economy.

Officials from both the Pennsylvania Independent Oil & Gas Association (PIOGA) and Associated Petroleum Industries of Pennsylvania (API-PA) immediately responded that the existing impact fee which producers pay serves the same purpose.

“Pennsylvania is blowing most other states out of the water when it comes to production. And by joining every other gas-producing state and passing a severance tax, we could also join them by bringing billions into our own coffers,” Wolf said. “Ask these oil and gas behemoths to pay their fair share for extracting Pennsylvania’s bountiful resources, and we can build a brighter future for Pennsylvania.”

PIOGA Pres. Daniel J. Weaver, at the association’s headquarters in Wexford, said, “Pennsylvania already has a severance tax. It is called an impact fee, and it translated to an equivalent of a 2.9% additional tax in 2017 when our state’s steep natural gas price discounts are taken into account and, despite this, is still projected to bring in $46.1 million more than in 2016.”

He said, “To propose another burden on our industry on the same day as an announcement by the state Department of Environmental Protection to increase well permitting fees by 250% is more evidence that the Wolf administration is seeking to punish Pennsylvania’s energy producers and job creators.”

A spokesman for Pennsylvania’s DEP notified OGJ on Feb. 8 that the agency did not make such an increase in its well permitting fee, but is working on a rulemaking package. “DEP’s oil and gas program is funded nearly entirely by fees paid with an initial application for a well permit. The current well permit fee is $5,000, and in addition to costs to review the application, that fee must fund programs costs related to inspection and oversight, as well as program administration throughout the 10-20 year lifespan of the well,” he explained.

While DEP recently announced steps to streamline its gas well permitting process, its oil and gas program currently runs a $6,000/month deficit which has resulted in a staff reduction and increased permit timeframes, the spokesman said. “The proposed well permit increase to $12,500 will help offset these lifetime costs and help ensure that the department is consistently meeting permit timelines,” he said.

DEP plans to present a 3-year regulatory fee and program analysis which concludes that a fee permit increase is needed at the Feb. 14 Oil & Gas Technical Advisory Board meeting, the DEP spokesman said.

“This is a tired proposal for a duplicative tax that isn’t about paying one’s fair share or filling a gap in existing revenue opportunities. The benefits that the governor seeks are already happening,” Stephanie Catarino Wissman, executive director at Harrisburg-based API-PA, which is an American Petroleum Institute affiliate, declared on Feb. 6.

“To suggest that Pennsylvanians aren’t already realizing the benefits of an energy tax is misleading. Impact tax dollars are helping to fix our roads, fund critical infrastructure projects and invest in our communities, thereby reducing tax burdens on Pennsylvania families,” Wissman said. “In fact, this year, the natural gas industry is expected to add $219 million in paid impact taxes to the commonwealth, up more than $46 million over the amount collected last year.”

Weaver said, “Nothing has changed in the state’s cumulative tax structure and impact fee program to make an additional severance tax anything more than a plan to stifle the growth of an increasingly important segment of our state’s economy. We still have the country’s highest corporate net income tax, and we continue to compete for investment against states with huge shale gas reserves and whose corporate and personal tax rates are far less than those in the commonwealth, including Texas, which collects no corporate or personal income taxes.”

Contact Nick Snow at nicks@pennwell.com.

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