Energy. Environment. Economy.

Old debate over taxing Marcellus Shale getting new life

State Sen. Vincent Hughes (D-Phila.) is proposing a five percent severance tax on shale gas to help the city's struggling public schools.

Katie Colaneri/StateImpact Pennsylvania

State Sen. Vincent Hughes (D-Phila.) is proposing a five percent severance tax on shale gas to help the city's struggling public schools.

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.


  • SCMProfessor

    I am in favor of mirroring the tax structure of the oil and gas producing states these legislators often cite. If we get a gas and oil severance tax, with NO personal income tax, and NO sales tax then I am “all in.” Until then, this is just one more tax added, and another power grab by legislators, regardless of side of the aisle.

    • hp35

      So you want to offset about $11 billion in income tax revenue and $10 billion in sales tax revenue with taxes on our natural gas production? That would take a tax of $94 per thousand cubic feet. That’s nearly 30 times the cost of the gas.

      • Kevin Bunn

        He’s a “professor” what do you expect?? A well thought out position??

        • SCMProfessor

          Kevin, are you making a living insulting people or is it just a hobby? My point (without taking too much of your time) was simply that to hold up a state or states (like TX, or OK) as a model for how we should be taxing oil and gas, without actually considering all the other ramifications and tax structures they have in place, would simply be, as you implied above for another post, moronic.

          Barring a full-on look at the comparisons between the two, we cannot simply say “let’s do what they are doing.” Without that, it appears to be a money grab, pure and simple.

  • Rex W Turner

    Selling LNG to foreign nations ensures that we will be trapped by profits and held prisoner to the Corporations that drill. Taxing them makes the government dependent upon revenue from an industry that is killing us all quickly, and killing the entire environment. Taxing gas with government dependence upon the revenue is the most profoundly stupid move that we could institute. We need to outlaw the entire practice before it kills us all. Drilling companies are ECO-TERRORISTS in America that will eventually make gas more expensive to us, and even to make water privatization inevitable. People who drill and sell privatized water are little short of death squads to the poor in America.

    • Kevin Bunn

      What a moron… We should tax solar and wind, especially wind, since they are costing us the most in tax subsidies…. Green energy kills……. Our economy… Those of us in the gas producing region should benefit from it not you big city liberals who oppose it. 100% of the impact fees should stay in the counties where it is generated. The hell with the rest of you……….

    • SideShowBob

      BWAHAHAHA….you are one vacuous clown.

    • Raul Kabinza

      Since gas development has been going on for more than a century, and hydro-fracturing has been going on for more than 60 years and directional drilling for more than 30 years, I’m just wondering how many have been killed by this needed industry so far.

  • SideShowBob

    Many of those advocating a severance tax are those residing outside the regions producing Marcellus Shale gas, and many of them are vocal critics of the development of shale gas, detractors of the industry and/or outright activist/protestors against the development of the Marcellus and/or fracking. So, they want to advocate against natural gas production while simultaneously holding their sleazy paws out for tax revenue from the same. Many of these vapid fools reside in and around Philly area & Southeast PA in general. Their representation in the state legislature constitutes an enormous voting bloc rural areas cannot counter. Thus a severance tax deposited in the PA General Fund would create a windfall easily hijacked by voting blocs from the large urban areas….the counties where the revenue is actually generated would be left holding the bag. Take a look at vocal severance tax loud mouth & current PA Democratic gubernatorial candidate, Rob McCord. Clueless Robbie resides in Montgomery County, just outside Philly. His website is rife with Rob rubbing one out as he trumpets his tough upbringing by a single Mom and his subsequent matriculation at Harvard & the Wharton School. Rob is demanding a 10% severance tax as his pounds on the table screaming….it’s our resource under our soil. Well, Silly, Little Robbie and all you folks in Philly can pound frack sand….it’s not your resource and it ain’t under your soil. The gas is under my land and my neighbors throughout the Marcellus region of the state. That’s why an Impact Fee is the only fair way to go…the revenue goes right back to its origin where it cannot be pilfered by folks who have zero stake in its development & production. Go suck on a cheesesteak & a Schmidts, McCord…and take your down state minions with you.

    • Raul Kabinza

      your argument is sound and well stated and stands alone without the vitriol.

      McCord knows all of this, yet is pandering to the all-too-well-known have-not factions, or in this case, those not being permitted to spend some of the impact fees.

      • SideShowBob

        That’s true Raul & thank you….I just can’t resist beating up on politicians who so clearly distort the truth of the matter for what they believe is their own benefit. Believe me…I’ll not lose any sleep over bashing McCord or any urban politician seeking to pilfer the rural bounty. You want to hunt rats, you gotta jump right in the sewer sometimes.

  • Raul Kabinza

    The big picture is LOST on many. That is, the traditional oil patch states have a market that has always had these jobs. Pennsylvania both gains a modest revenue in the Impact Fee AND more than 100,000 new jobs that generate EIT, sales taxes, property taxes and more.

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