HARRISBURG – Legislation imposing a severance tax on natural gas extracted in Pennsylvania was the topic of conversation by lawmakers today during a joint Senate public hearing in Harrisburg.
State Senator John Eichelberger (R-30), Chairman of the Senate Finance Committee and Senator Gene Yaw (R-23), Chairman of the Environmental Resources and Energy Committee, convened the hearing to examine complexities and impacts of implementation of a shale tax on the Commonwealth’s natural gas drilling industry.
In February, Governor Tom Wolf outlined his platform for education reinvestment that requires enactment of a five percent severance tax, in addition to 4.7 cents per thousand cubic feet of gas extracted, to fully fund his proposal.
The joint Senate panel heard testimony from state officials, representatives from the oil and gas, business and industry, as well as outside think tank organizations.
“There was a clear difference between the administration and the business community about the impact of the proposed tax on the energy industry,” said Sen. Eichelberger. “The bottom line is that this tax will cost jobs today and greatly damage the opportunity for generations of Pennsylvanians to succeed and prosper in the future.”
“As the Wolf Administration pushes for a severance tax, we must be mindful of the opportunities currently being offered to our citizens as the result of Pennsylvania’s Act 13 impact fee law,” said Sen. Yaw. “No other law in recent memory has brought so much back to rural Pennsylvania and I do not want to see that changed.”
Acting Pennsylvania Department of Revenue Secretary Eileen H. McNulty testified today that Governor Wolf’s severance proposal was modelled after West Virginia, and also sets a price floor of $2.97 per thousand cubic feet in order to fund schools and maintain funding to communities impacted by drilling.
McNulty further acknowledged that local impacted municipalities would not share in any increased drilling monies due to a cap on local distribution, according to the Wolf plan.
Matthew Knittel, Director of the Independent Fiscal Office, noted that a proposed severance tax would likely move Pennsylvania from one of the lowest severance tax states to the highest, relative to other major gas producing states.
“Historically, the impact fee has translated into an average tax rate of roughly 2.0 to 4.0 percent on the market value of annual production. For 2015, the analysis projects and average tax rate of 4.7 percent, due to very low regional prices. For 2016, the analysis projects an average tax rate of 17.3 percent under the proposed severance tax.”
“This (severance tax) proposal will cost jobs, increase energy costs for our citizens, and squander the opportunity to make Pennsylvania an attractive state for business and investment,” said Lou D’Amico, President and CEO of the Pennsylvania Independent Oil and Gas Association.
“I have heard it said in Harrisburg that Pennsylvania ranks 48th of the 50 states in job creation. I’m not sure that I buy that statement, but if it is indeed true, there is something for the states ranked 49 and 50 to take as encouragement. If Pennsylvania does impose a severance tax, Pennsylvania will assume the pole position in the race to the bottom.”
For additional testimony and video from today’s committee meeting, visit www.senatorgeneyaw.com.
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For more information, contact:
Adam Pankake (Sen. Yaw)
(717) 787-3280
Lee Derr (Sen. Eichelberger)
(717) 787-5490