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Marcellus Shale Coalition warns against tax proposals

A drill rig rises above a farm in Northeastern Pennsylvania.

Kim Paynter/ WHYY / WHYY/

A drill rig rises above a farm in Northeastern

The Marcellus Shale Coalition is criticizing proposals by unnamed gubernatorial candidates to create a severance tax on natural gas production in Pennsylvania.
In a statement Thursday, the industry organization described the economic, tax revenue and employment benefits of shale development in the state then condemned “some candidates for office” who have “embraced misguided, job-crushing policies that would throw a wet blanket on this positive, widespread progress.”
According to the Associated Press:

“A [coalition] spokesman later pointed to statements by six different candidates seeking the Democratic Party nomination favoring similar severance tax proposals that could raise more than $1 billion a year from the industry.”

As StateImpact reported last month, Democratic gubernatorial candidates U.S. Rep. Allyson Schwartz, John Hanger and Katie McGinty have all expressed support for a severance tax.
The industry has had plenty of time to develop its argument: Severance tax proposals have been debated for years. But Gov. Tom Corbett decided to levy an impact fee based on the number of wells drilled instead of a tax based on the amount of gas produced. In two years, the fee has raised about $400 million for Pennsylvania programs and local governments. Critics insist the state deserves more for its role in the extraction boom.
As it has in the past, the coalition argued Thursday that additional taxes would encourage the industry to move its operations to other states:

“Massive new energy taxes – in addition to the already enacted impact fee – would without question result in less capital investment into the Commonwealth, fewer jobs and even less revenue generated for the citizens of Pennsylvania.
More than 100 rigs were operating in Pennsylvania in 2012. Yet today, given low natural gas prices and the increasing number of competitive shale plays across the country, there are roughly 50 rigs operating. To be sure, new energy taxes will reduce development in Pennsylvania, and more capital – not less – will be directed to other states or countries.”

Schwartz said last month that her proposal for a 5 percent severance tax would not drive away the industry because it is lower than taxes in other natural gas drilling states like Texas and Oklahoma.

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