Pennsylvania

Energy. Environment. Economy.

Corbett administration won’t ‘rule out’ gas tax this year

Tom Corbett

Marie Cusick/ StateImpact Pennsylvania

"I don't like a severance tax," Corbett said at a press conference today in Harrisburg. However, his budget secretary says the administration has not ruled it out as a way to raise revenue.

With mounting pressure to find new revenue in the face of an estimated $1.4 billion budget gap this year, the Corbett administration is signaling it may be open to levying a new extraction tax on Pennsylvania’s natural gas operators.

At a press conference in Harrisburg today, Corbett said he still doesn’t like the idea of taxing gas production, but he’s open to raising revenue and imposing new taxes if the legislature deals with one of his top priorities– pension reform.

Corbett wants to replace the state’s public pension system with a less costly hybrid 401(k)-style program for future hires.

“Right now we have a 50 billion dollar problem,” he said, referring to pension obligations. “We have to deal with that if you want me to even consider dealing with revenue. I’m not going to say revenue is a severance tax or any other type. Let’s deal with the cost driver first.”

Corbett says he is willing to miss the legally-mandated June 30th budget deadline in order to get a deal done, noting that Lieutenant Governor Jim Cawley has already cancelled a planned family cruise.

Speaking with reporters after the press conference, Corbett’s Budget Secretary, Charles Zogby, was clear that raising taxes on drillers is still on the table.

“There’s multiple options we can look at,” he said. “I’m not ruling out a severance tax.”

Legislators from both parties have been proposing various gas tax bills.

Steve Miskin, a spokesman for the House Republicans, says a tax is something, “we’re not advocating right now,” but added, “I know a lot of people are advocating it, so I gather it’s on the table.”

Pennsylvania is the largest gas-producing state in the country without a tax on production. Instead, companies pay an impact fee for every well they drill. Depending on the market price of gas, the fees range from $40,000 to $60,000 per well. Drillers continue to pay over a 15 year span, with the price declining over time.

Over the past three years, the impact fees have brought in an average of $210 million annually.

Taxing gas production has become a major issue in the gubernatorial campaign. Corbett’s Democratic challenger, Tom Wolf, is pushing for a five percent tax on production, which he says he’ll spend on primarily on public education.

Comments

  • Mark Cares

    So now he is going to penalize the one industry growing high paying jobs in PA? What is he going to do when they leave the state? If you don’t think so then look at Alaska, They where the second largest producer of oil in the country, oil and gas paid for 95% of the states revenue, but that was not enough. No AK has fallen to number 4 behind CA. Maybe if old Tom just cut spending they would have enough money. He is 20 points behind and he talks tax increases. Can anybody say George Bush 41, anybody. Good bye Tom it was nice knowing you.

  • Victoria Switzer

    Our state should be rolling in money. We are the Saudi Arabia. We are the sweet spot. We are sacrificing so much for the gas industry and yet we are in serious financial trouble? What is wrong with this picture? Everything! As much as I hate to see rural PA bisected, fragmented, and industrialized, I could find some comfort if our schools were well funded, our highways smooth and solid, our bridges repaired or replaced with safe structures. The industry came to PA prepared to pay a tax like they do in any other energy state. Gas and oil are nonrenewable resources. When they are gone the industry will be too but our state will look nothing like it does today. To quote a gas worker…”they won’t recognize this place”

    • pbruder331@gmail.com

      No, we are NOT Saudi Arabia. In terms of natural resources – yes, but in terms of the free market, no. If you want to government to own everything, then yes, we can be a wealthy state and nation like SA. Is that what you really want?

      • Victoria Switzer

        I was making reference to what our politicians have called PA-they use that to illustrate the vastness and wealth of the Marcellus. I do not think they nor was I speaking about the government of Saudi. I taught history/government and know a little bit about that. I want the gas industry to pay their fair share for exploiting my state, my home. I would like to see the state benefit long term from this. The politicians and the gas supporters still talk about the “Golden Goose”. They cry we will chase the goose away if we tax them! The gas is here. They will stay here until that goose is plucked clean. What will be the legacy?

    • Pragmatism Wins

      Natural gas companies have paid billions in taxes through conventional avenues. They’ve paid over $600MM through just the impact fee. This state has been mis-managed for decades. What do you think the tax rate should be? The impact fee is about a 2.5% tax. You want to do another 5% on top of that? How about 10%? Companies are not going to pull up and abandon PA if there is a tax enacted, but they will most certainly divert capex to other plays in other states. If companies invest, say…30% less because of PA enacting a hefty severance tax…how much in revenue will we lose through conventional taxes? There’s an excellent chance there would be a net LOSS in tax revenue. Not to mention the loss in jobs, increases in utility bills, and a general reversal of the myriad benefits that drilling brings.

      To quote high school guidance counselors 5 years ago: “you won’t recognize this place… because you’ll only see it one time a year…when you come home to visit your family from wherever you had to move to find work”.

  • kenneth weir

    the pigs are coming home to eat , tommy corporate needs to get elected and he is desperate for your vote. I thought prostitution was an illegal activity.

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