Energy. Environment. Economy.

Analysis finds Pa.’s effective tax rate on shale gas wells among lowest

The state Independent Fiscal Office compared Pennsylvania to ten other shale gas-producing states.

Lindsay Lazarski/WHYY

The state Independent Fiscal Office compared Pennsylvania to ten other shale gas-producing states.

Pennsylvania has one of the lowest effective tax rates on shale gas extraction, according to an analysis from the state’s Independent Fiscal Office (IFO).

The analysis only considers Marcellus gas wells going into production this year. It compares Pennsylvania against ten other shale gas-producing states around the country.

“The states we examined were either a large shale producer, or they were in close proximity to Pennsylvania,” says IFO director Matt Knittel. “Under most of the scenarios we examined, Pennsylvania does have the lowest effective tax rate.”

However, the analysis does leave out some types of taxes paid by natural gas producers, including sales and corporate income taxes.

“Pennsylvania does have the second-highest corporate income tax rate in the United States,” says Knittel. “However it’s difficult because we do not know to whom the income accrues to. It could go to a multi-state corporation. It could be apportioned to Pennsylvania and to another state.”

Knittel says the main taxes the IFO counted were state severance taxes (Pennsylvania’s impact fee was treated as a severance tax) and local property taxes– levied on value of natural gas reserves, yet to be extracted.

The state’s gas industry trade group, the Marcellus Shale Coalition, issued a page-long rebuttal to the report, arguing its methodology was flawed.

“IFO states clearly that Pennsylvania has some of the highest business taxes and energy fees and that this is not an ‘apples to apples’ comparison of the total tax liability for oil and natural gas producers across states,” said MSC president Dave Spigelmyer in a statement.

Governor Corbett’s Energy Executive Patrick Henderson echoed similar sentiments.

“The report fails to account for, among other deficiencies, the full continuum of taxes paid by oil and gas operators in Pennsylvania, including the corporate net or personal income tax; sales and use tax; liquid fuels tax, and others that have contributed over $2 billion to Pennsylvania revenues since 2008.”

In his reelection campaign, Corbett is promoting the state’s existing impact fee–which has generated about $200 million annually–while his democratic opponents have called for a severance tax.



  • Casper

    Every state that has an abundance of energy collects corporate net or personal income tax; sales and use tax; liquid fuels tax. Or variations of them. They also charge a severance tax on top of those as well. Texas happens to use that severance tax to keep other taxes low. They balance their state’s budgets with more oil revenues mixed in.

    I am not saying tax them at a crazy rate… but we gave away the store! It isn’t like this opportunity comes around very often. Maybe use it to fix the roads and bridges. Maybe restore the cuts to education (I can’t believe this administration did that in the first place). Maybe use the NG revenue to create a state fund like Alaska’s. God forbid we save for an economic downturn. There are many paths to take. Choosing to leave money on the table is just bad fiscal stewardship.

    • JimS

      I agree completely, but here is the problem. The two candidates and the overall are like trading a headache for an upset stomach. Corbett has to override his party and use the Texas model. Wolf, now that he has a bundle doesn’t want to redistribute his money but redistribute your money and mine rather than do what many Americans are trying to do which is pay down debt. No one, absolutely no one has shown a positive correlation between MARGINAL increases in spending and academic performance. It’s like saying that if we paid priests the results at parochial schools would rise. Teaching used to be a calling at reasonable compensation secondary til Albert Shaker started his BS and strikes 30+ years ago.
      Both have to move to problem solving and not pander to one group vs another. That’s the candidate that will get my vote. Note that Wolf hasn’t pushed for a progressive Wealth tax more than just a flat personal property tax. That is the dis-ingenuousness of his campaign. At the end of the day I will probably vote for Corbett. I hate pols that insult my intelligence. It like a choice of being robbed or con-ed? I’d rather be robbed as robbers take what I have on me con-men take everything.

      • Sean


      • Sean

        What debt? Pennsylvania has a balanced budget, by statute. Teaching is not a calling. It is a career. It is a career where those in it should expect to be paid commensurate with their education and the responsibility of the position. Teachers were not paid “reasonably” fifty years ago. Some are now paid reasonably; many are not.

  • Sullivjo

    I would appreciate if this article showed the data so I can make an informed decision. While I was aware PA has the lowest “taxes on natural gas”, I was not aware that other corporate taxes are very high, comparatively.

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