Democrats in Pennsylvania have pushed for years to impose a severance tax on natural gas drilling in the commonwealth – to no avail.
Now, a Republican lawmaker from Bucks County plans to introduce a bill that would put a 4.9 percent tax based on the value of natural gas produced and sold from each well. Rep. Gene DiGirolamo is also proposing the state scrap the impact fee it currently charges for every well drilled.
DiGirolamo says it would generate an estimated $640 million in revenue, while preserving money for the communities that host the drilling.
DiGirolamo said he thinks the topic is worthy of discussion by the legislature. He said he wants to protect the $237 million now going to counties and municipalities under the impact fee.
There has been no natural gas drilling in Bucks County, but the county does receive a small amount from the fees.
The additional $400 million would be divvied up within the state’s general fund, with the largest piece – 40 percent – for education and the rest set aside for the environment, parks, solar energy, and health and human services.
DiGirolamo said the total impact fee, paid over 15 years, would amount to less than 2 percent of the value of the natural gas sold from the well. “Our proposal, like that of so many other states, is to tax the value of the natural gas produced,” he wrote in his memo seeking cosponsors for the bill.
The impact fee fluctuates over a period of 15 years. Last year, operators paid a $45,000 for each new well drilled.
DiGirolamo is proposing a lower rate than other oil and gas states that impose an overall tax. Operators in Texas, for example, pay a 7.5 percent severance tax. In Oklahoma, the tax rate is 7 percent.
Republican Governor Tom Corbett supports the impact fee as a way to support communities that host drilling operations. But several of his eight democratic challengers, including Congresswoman Allyson Schwartz, want drillers to pay up to fill state funding gaps for education and transportation.
“It’s certainly not what I’d call a game changer,” said pollster Terry Madonna of Franklin and Marshall College of DiGirolamo’s proposal.
In fact, this isn’t the first time DiGirloamo has pushed for a severance tax.
“The House is filled with 25, 30 members who’ve voted for no tax hike, no fee hike pledge when they were elected,” Madonna said. “I don’t think you could get a majority of Republicans of the 110 Republicans in the House caucus to vote for a severance tax.”
Not in an election year, Madonna noted.