Wolf's gas tax estimate might be too high

  • Marie Cusick

Gov.-elect Tom Wolf.

Gov.-elect Tom Wolf wants to change the way the state taxes the natural gas industry.


The Associated Press reports Governor-elect Tom Wolf may have been hundreds of millions of dollar off in his estimate of how much money a gas severance tax could generate for Pennsylvania.
On the campaign trail, Wolf repeatedly said his proposed five percent tax on gas production could bring in $1 billion.
More from the AP:

But his estimate assumes a wholesale price of gas that drillers in the Marcellus right now can only dream about. At current prices and production, a 5 percent severance tax would produce as little as $525 million and as much as $675 million a year, depending on the extent to which drillers would be permitted to deduct gathering costs.
Shale drillers, who have long opposed a tax, argue that Wolf’s billion-dollar projection is wildly optimistic.
“He’s talking about a number that’s not attainable.” said Dave Spigelmyer, president of the Marcellus Shale Coalition, a trade group. “It’s a myth.”
Wolf relied on an August analysis by the Pennsylvania Budget and Policy Center, a progressive research group, which arrived at $1 billion by using federal estimates of what the benchmark price of natural gas will be in fiscal 2015-16. But Marcellus drillers have not been getting anywhere close to the benchmark.

The state’s current impact fee, which levies a flat per-well fee on drillers brings in about $210 million per year.

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