Energy. Environment. Economy.

Democrat Tom Wolf talks extraction tax and protecting the environment

Democrat Tom Wolf talks to reporters at the WHYY studio in Philadelphia.

Lindsay Lazarsky / Newsworks/WHYY

Democrat Tom Wolf talks to reporters at the WHYY studio in Philadelphia.

StateImpact Pennsylvania’s Susan Phillips sat down with both candidates for governor and pressed them on energy issues. The candidates visited WHYY in Philadelphia, where several reporters interviewed them for about ten minutes each. Wolf has proposed taxing the Marcellus Shale gas differently than Governor Corbett. Wolf wants to charge a 5 percent tax on the market value of the gas at the wellhead. This is called a “severance tax” or some call it an “extraction tax.” The following is the transcript and audio of StateImpact’s interview with Democrat Tom Wolf, edited for time and clarity.

Q: So, you talked about the Marcellus Shale severance tax at 5 percent, which you estimate could generate up to $1 billion.  Tell me how you think that would impact the pace of drilling. Are you going to do anything to halt or slow down the pace of drilling? What are your plans for the parks and forests? Obviously that billion dollars is based on production levels right now.

A: I think that this industry could be a game changer for Pennsylvania’s economy if it’s done right. But it has to be done right in two ways.  One it has to be done right environmentally, so that the concerns, the legitimate concerns of people who look at methane leakage, water contamination, that the industry actually addresses those concerns or the industry won’t be healthy in Pennsylvania.

Second, we need to make sure that we’re creating good jobs here in Pennsylvania. That this is not just an export only industry, that we’re actually piping this stuff down to the Henry Hub and the good jobs aren’t being created in Louisiana or Texas. So we need an extraction tax, I think, to fund the public goods that would make the industry work better, the education to make sure that [the industry] has the employees who have relevant skills, that we have the infrastructure.

Q: One of the things that Governor Corbett says is, if you tax Marcellus Shale, the rigs are going to just up and leave to Texas. It only takes two weeks for a rig and its whole crew to get down to Texas. Will your 5 percent severance tax make this industry disappear and migrate back to Texas?

A: No.

Q: Why?

A: Well, again, I’ve spent my life in business I understand how important taxes are as an incentive or disincentive.

Q: But this is not kitchen cabinets this is oil and gas.

A: It’s business. And look at where we are. We are where the gas is. Pennsylvania is sitting on a huge reserve of gas. We’re also sitting right in the market. This is where that gas that comes out of those other states has to go to be consumed. If [the tax] is too high, clearly that would be a disincentive and would drive industry away in droves. But a modest 5 percent tax — they’re paying, right now, what would be the impact fee, and the [estimated calculated comparison to a severance tax] is about 1.3 percent, and it’s not a severance tax. But a 5 percent severance tax would be a slight increase over that but I think it would actually have a positive impact and here’s why.

One of the problems the gas industry has right now is distribution. And [in] the places that don’t have gas beneath them, the industry needs to have pipelines [built] for the distribution to get stuff to say, the Port of Philadelphia, where there might be jobs created. Right now it’s hard to go to those [communities] and say hey lets take one for the team here, let’s do something that’s going to benefit all Pennsylvanians, because it doesn’t. We don’t have a severance tax therefore this industry is not creating clear benefits for Pennsylvania in terms of helping our schools for example. And as a result we also don’t have the funding to create the relevant skills that would help staff that industry so that right here in Pennsylvania we can create good jobs. So I think a 5 percent severance tax would actually make the industry stronger. I think it would do wonderful things for Pennsylvania and my goal would be to overall to make this industry work for us. I want this to work.

Q: Ok, you talked about the environment and you care about the environment. We all care about the environment. But at the end of the day what really matters is who’s in charge, who is the watchdog and what are their marching orders. So, over the past several years StateImpact has done several stories about how the state has failed, at least from a lot of residents’ perspective, to protect the environment, to protect public health. We did a story about the Department of Public Health actually discouraging employees from talking to residents about their health concerns. What I want to know is what can you do to assure the voters, how will you actually be different? How will those departments be run differently? How will you gain the residents’ trust back in the [departments of] environment and public health?

A: I want to be judged by my deeds. But I start with the recognition that if we don’t do this right from an environmental point of view, that industry is not going to have the support it needs to flourish in Pennsylvania. From the Department of Health point of view, the Department of Environmental Protection, we need to do a better job. I think the Auditor General just did a report on the Department of Environmental Protection saying that they don’t have enough staff and the regulations are inadequate to do what they have to do. I would do what I need to do to make sure,…

Q: But what is that?

A: Well, one of the things is just again, money. The Marcellus Shale tax, if we got a billion dollars some of that would go back to the localities, because this would take the place of the impact fee, to pay local areas that allow for the drilling. But the second thing would be money to go to the Department of Environmental Protection to make sure they have in place the right regulations and adequate staffing to make sure they are enforcing these regulations. The ideal would be to prevent in every case any environmental degradation.

Q: Governor Corbett said that too, that’s what politicians say. But what are you going to put in place, what can you tell people who are really concerned, who have lived with this environmental degradation? And you want to put in a 5 percent severance tax, which is going to pay for a lot of things, which in a sense could mean that your administration wants to get as much money from drilling as possible. So some might think, well they’re going to just ignore the environmental impacts and ignore the health impacts because they’re interested in all this money.

A: Right, as I just said I’m not going to do that. I’m going to take some of that money and put it into the Department of Environmental Protection to make sure that we have the regulations and the staffing to make sure we’re doing this environmentally correctly. And again, the key here is my recognition, in a way I don’t think this current governor understands, that if we don’t do this right environmentally then we’re not going to have an industry.

Q: Parks and forests, what do you think about drilling there?

A: I’m against it.

Q: We’ve also got the carbon rules, the federal EPA has put in place proposed standards that they want the states to follow. When we spoke to Governor Corbett last week, he said he doesn’t agree with how they put those standards in place without going to Congress. Curious what you think about those standards, how would you act to make the Department of Environmental Protection put in rules that would comply?

A: I think [that] the EPA rules are more of a reflection of an emerging reality.  The world is moving toward a lower carbon footprint. And Pennsylvania, like every other state, is going to have to continue to figure out how to adjust to that. Now, in Pennsylvania’s case, that’s a big challenge, because coal is a huge huge part of our economy. It’s a huge source of jobs. And one of the things the EPA does is give some latitude to states in terms of the implementation of those rules. And they’re still in draft form anyway. So I think its incumbent on the next governor to not just close his ears or duck his head into the sand and say I don’t like these therefore I’m just going to complain or I’m going to hope this passes over. Actually do something. Say ok, we’re moving toward a world where carbon is less tolerated and we have coal here, that’s the reality, what are we going to do about it? We can look at clean coal, we can look at the new ways of doing carbon sequestration so we can actually make this resource work for us in the future. That’s incumbent on, I think, the industry working with the state government in Pennsylvania to figure out how we do that, not to close your ears and say I’m just not going to think about it.

Q: You mention the coal industry and how important that is to the state, there’s a lot of people employed in that industry who are really scared of these rules right now, what would you say to them?

A: I’d say let’s work together. As I said the rules are a reflection of a broader reality and that is there are fewer coal fired power plants being built in the world. There are exceptions to that. But in the long run we’re all going to have to figure out how we do what we do, generate electricity and energy, with a lower carbon footprint and I think coal has the ability and the potential to do that. But we’ve gotta work together to figure that out. And again, not blame one president, not blame the EPA. This is reality and lets figure out how we adjust to it. That’s going to take leadership. That’s going to take some cooperation. That’s going to take strong input from the Commonwealth of Pennsylvania, recognizing the strong role of coal. But I think we can do that. I think there is a strong future for coal. And Pennsylvania has every incentive to make sure that coal is part of that energy future where there’s less of a carbon footprint.

Q: Ok, one thing I asked Governor Corbett was whether he did an analysis of what specifically Marcellus Shale drillers paid in income tax, just Marcellus Shale drillers. And I’m just wondering have you done that analysis?

A: I have not.

Q: Do you think it can be done?

A: I’m sure if you had access to the information, it can’t be done by someone on the outside because the information is confidential.


  • Victim_of_Republicans

    If members of the working class (basically 95% of us) want a better future, Wolf is the obvious choice. So, it’s basically up to the voters if they want a better future. If voters are honest, they will look back upon the past 4 years of the Corbett administration and conclude that they’ve gotten the shaft and that it’s time for Corbett to be replaced. Why endure another 4 years of his policies? It makes no common sense. Voters shouldn’t sit around and ASSUME Wolf will win. They should go out there on election day and make it happen.

    As technology increases, life is supposed to become better for ALL members of society. Resources should become more equitably divided over time as technology improves and life should get easier for EVERYone. If Republicans are in charge, that will never happen. Republicans embrace a much more primitive past.

  • Fred_PA_2000

    In an attempt to compare apples to apples, let’s look at taxes in Texas vs. taxes in Pennsylvania.
    Texas, I believe, has a 7.5% extraction tax but no income tax.
    Wolf wants a 5% extraction tax in addition to the income taxes paid.
    Corbett — in the companion interview to this one — said the entire drilling industry (drillers and their subcontractors) are paying about $2.5 Billion in income taxes (plus about $250 Million in impact fees).
    Wolf says the impact fees equal about 1.3%, and replacing them with an extraction tax of 5% would raise about $1 Billion.
    So if 5% is $1 Billion, and we assume the drilling industry will still be expected to also pay their $2.5 Billion in income taxes, the total $3.5 Billion they’d pay in our state is equivalent to a 17.5% extraction tax.
    Versus 7.5% in Texas.
    Guess where they’re going to decide to drill.

  • StephenCleghorn

    “So, over the past several years StateImpact has done several stories
    about how the state has failed, at least from a lot of residents’
    perspective, to protect the environment, to protect public health.” What?! There are facts, not just some “residents’ perspective.” Susan Phillips, you and StateImpact have done a great job of documenting many of those facts, so don’t hedge on saying this: “Over the past several years StateImpact has done several stories
    about how the state has failed to protect the environment, to protect public health.”

    • Scott Cannon

      I heard NPR is cutting back on environmental reporters from 3 to 1.

      • Jack Wolf

        Tell them that this is unacceptable in an abruptly changing climate.

  • Scott Cannon

    No matter what, drilling as much and as fast as you can is irresponsible. So what if some of the drillers move their wells, it will prolong our environments destruction. That is a good thing. Protecting the environment means doing nothing to it. You cannot frack, AND “protect the environment”, for every political who keeps using that phrase.

  • Jack Wolf

    In an abruptly changing climate due to fossil fuel emissions, to propose any fossil fuel use is nuts. And, to do so with a process that leaks prodigious amounts of methane is doubly nuts.

  • Jack Wolf

    How can it possibly be “done right” when more methane and carbon dioxide in the atmosphere is exactly the opposite of what is now demanded of us to avoid the most catastrophic impacts of climate change? Hasn’t he noticed that climate change impacts have already started (and will get much worse), or understand what the scientists have been saying? Oh, this is so frustrating to watch as the march to folly continues unabated.

  • Carol French

    My advice to Tom Wolf is start looking into the DEP files. There are enough workers, but there is someone in Harrisburg that is stopping them from doing their job. One question, why would the DEP allow the gas company to operate for over one year without a permit? The DEP was aware of the operation, because of the violations that were issued. Major “spills” occurred…. many residents lost their drinking water. The DEP denied the residents drinking water and continued to allow CHK to operate, without one fine. Tom Wolf, if you want my vote ask to see these DEP files and will gladly provide them to you!

  • wendylynnelee

    One stop shopping for your election day decision-making: Two “Toms,” a Sheep Outfit, and a Drill Bit: The Lies that Win Elections for the Gas Thugs

    Upshot: I think there are few if any solutions to our present ecological, economic, political, and social crises other than getting well beyond a corrupt two party system, and I think that every time we concede to it, we are making a future for our children and grandchildren more and more uninhabitable.

  • wendylynnelee

    1. A tax on natural gas extraction via fracking will institutionalize the industry by making social programs dependent on its revenue stream. However much the industry resists it, they know that any tax will have this positive effect for them–and so their resistance is feigned and simply aimed at the lowest tax possible. The amount of the tax has no real bearing on the extent to which it institutionalizes the industry as part of the state’s internal revenue structure.
    2. Wolf is the best thing that could happen to the gas industry–far better than Corbett–because while the duped are celebrating Wolf’s imposing a tax, the industry will go about their dirty business as usual–but with the added bonus that they now have the cover of legitimacy behind a painless tax that will guarantee their presence in the state forever–or until they leave us a spent industrialized wasteland. Corbett could never have lent them this cover.
    3. Taxing the industry will actively encourage even less regulation. The formula is simple” Imposing a tax=insuring dependence of social programs=pressure to generate more revenue=pressure for the industry to make more money=weakening regulations. In other words, the more dependence, the more pressure to generate greater tax revenues, and because the tax as a percentage of profit is never going to amount to anything substantial, the thing that’s going to have to give is the regulations and their enforcement. When you add to this the fact that–as this article demonstrates once again–the regulations are meaningless and unenforceable now, just imagine what that will mean given the institutionalization of the industry. Welcome to Texas.
    4. Once the industry is institutionalized in the state’s tax structure, they will be able to exert pressure like never before. They will be in a position to level substantive threats of withdrawal and whoever is governor will cave to the threat precisely because essential social programs–and (thanks to Wolf) funding for education will now be tied to gas tax revenue. The regulations will then be enforced even less, more and more Democrats will jump on board for horrendous bills like the gutting of the state’s endangered species act–and representative like yourself will have paved the way for the future industrialization of the state including the further erosion of property rights, rights to clean air and water, rights to speak out against the industry. In short, an invitation to become part of the state’s essential economic wherewithal in an invitation to corporate hegemony.
    5. (1)-(4) can have only one conclusion: more fracking including all of its dirty and damaging infrastructure.
    Of all the issues confronting Pennsylvanians—health care, education, jobs, etc.—among the most important of these are the devastating ecological and human rights toll the fossil fuel extraction industry has taken on the Commonwealth, her neighboring states, and the planet as a whole in the form of its potentially devastating contribution to climate change.
    Fracking must be banned.
    There are many reasons why an articulate and uncompromising opposition to hydraulic fracturing, mountain top removal, tar sands extraction, other forms of unconventional gas drilling, the Keystone Pipeline, the construction of LNG export depots, is critical to the Pennsylvania gubernatorial campaign.
    Here are just four:
    1.The responsibility of the governor is to uphold the Pennsylvania Constitution, including Article 1, section 27: “The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.”
    2.The fossil fuel industry’s profit objectives are demonstrably inconsistent with the commitment to health care, education, and jobs.
    A few examples:
    a. Health care: given the hazardous health effects that follow from exposure to the carcinogens, biocides, and other toxins associated with the fracking process; given that a similar account can be given for exposure to toxins resultant from compressor station emissions; given the potential for explosions at every juncture of this process—frack pad, pipeline, truck accident, compressor; and lastly, given that these hazards make particularly vulnerable populations already marginalized by the state’s inadequate health care access, no case can be made in defense of the industry’s conversion of Pennsylvania into what amounts to an extraction factory for wealthy multinationals.
    b. Education: in addition to the obvious hazards of locating extraction-associated facilities next to public schools, the effort of the Corbett administration to extort state universities into accepting extraction operations on their campuses is in obvious conflict with the missions of those public institutions, and inconsistent with the commitment to the health and welfare of their communities. APSCUF—the Associated Pennsylvania State College and University Faculty union—opposes any such construction, and I had the privilege of drafting that resolution for all 14 campuses.
    c. Jobs: as is made clear on the numbers, the shale boom has not generated lasting employment for Pennsylvanians. Instead, it has diminished the potential for future employment in industries connected to our once spectacular forests, rivers, and high value streams, exposed mostly non-unionized workers to toxic health hazards, and exported profits from frack pad to off-shore bank accounts of already obscenely wealthy CEOs. That a very few may become very wealthy via royalties or other associated enterprise at the expense of the very many is intolerable to a democratic union and a prescription for future disaster.
    3. States are no more closed loop systems than are human bodies or frack pads. In a world increasingly confronted by the effects of global climate change, deforestation, desertification, and toxic pollution, governors and legislators must act responsibly not merely to their own constituents—much less to their campaign donors—but to the stability of the global ecology as a whole. We can no longer afford to bury our heads in the sand about the impacts of an industry whose history so clearly shows that its mercenary drive to profit exceeds at every turn its commitment to human welfare or ecological stability.
    4. States do not have the right to deploy their police forces to quash dissent—yet, our current administration not only acts legislatively to insure the smooth path to profit, but deploys its police resources against the people in an effort to suppress, fear-monger, manipulate, and intimidate those who expose this path as littered with toxins, political corruptions, and egregious forms of harm. Look for example to Adam Federman’s recent account of the Marcellus Shale Operator’s Crime Committee.
    Extreme forms of fossil fuel extraction must be banned not only because the citizens of the Commonwealth cannot afford the consequences, but because no regulation can adequately prevent the harm. As we at Shale Justice (Shale Justice) claim consistently: regulation is about nothing other than controlling temporarily the rate of harm—not the quantity, not the duration. Moreover, no matter what some argue are “best practices,” none keep the gas in the ground—the only strategy that will prevent the contribution of fossil fuel extraction to climate change.
    Pennsylvania’s governor must act not only in the interest of all Pennsylvanians—but for the future of Pennsylvania. What this means is that she or he must take seriously the adage that the local is the global—for this is no mere hyperbole; it is fact.
    And as such, it is moral duty.

  • pghsheep

    Explain “Commonwealth”.

  • pghsheep

    Heavy Industrial in 100% of our Townships is evil running over. This is not to be taken lightly.

  • pghsheep

    When you do your research PA gas is being used to go for more Tar Sands Oil. Insanity to the max.

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