An old debate over taxing natural gas production in Pennsylvania has been getting new life. A Republican state representative from Bucks County has introduced legislation to create a severance tax on shale gas. Democrats running to unseat Governor Tom Corbett are also calling for a tax. Last week, a report by the state’s Independent Financial Office found Pennsylvania has one of the lowest effective tax rates compared to other gas drilling states.
Today, State Sen. Vincent Hughes (D-Philadelphia) joined the chorus, calling for a five percent severance tax on natural gas.
At a rally outside the Philadelphia School District offices, Hughes said the tax would generate about $720 million in the first year, of which $375 million would go to the state’s public schools.
“We have a very difficult budget problem that’s going on right now,” he said. “We have to find resources from some places and all circumstances are coming together to try to get this done.”
Attempts to pass a severance tax stalled under the Rendell administration in 2010. However, Hughes believes pushing the need for more education funding will convince Republicans and Democrats across Pennsylvania when state budget talks begin in June.
Governor Tom Corbett supports the state’s impact fee system which has generated $400 million since 2012 and sends sixty percent of the money back to communities that host the drilling. Hughes’ proposal calls for a severance tax on top of the impact fee.
“The door will never be closed on any of these policy issues, per se,” said Patrick Henderson, Corbett’s Energy Executive.
Henderson believes critics aren’t looking at the big picture, which also includes the number of jobs natural gas drilling has brought to Pennsylvania, as well as lower energy prices.
“We need an honest discussion of whether Pennsylvanians are receiving cumulatively the benefits they deserve from natural gas development,” Henderson said.