New year, new severance tax proposals

  • Susan Phillips
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.) at a press conference in 2014, where he proposed a 5 percent tax. The Senator now plans to introduce an 8 percent tax.

A bipartisan group of lawmakers say they’ve got the right formula for getting a natural gas tax through the legislature. It would include a 3.2 percent tax on gas production, while keeping the current impact fee.  The group led by Bucks county Republican Representative Gene DiGirolamo, say keeping the impact fee, which helps boost the budgets of small towns and rural counties where drilling occurs, is key. And DiGirolamo says a 3.2 percent tax along with the impact fee, is equivalent to a 5 percent tax. Governor Wolf campaigned on a 5 percent tax as a way to solve the state’s education funding crisis. Another group of liberal lawmakers led by Philadelphia state senators Art Haywood (D-4) and Vincent Hughes (D-7) will announce a proposed 8 percent tax today. Last year Hughes proposed a 5 percent severance tax, which like all the drilling tax proposals never gained traction. Pennsylvania charges a per well impact fee, but is the only major gas producing state not to tax production at the wellhead. DiGirolamo says his proposal, which combines the two, will get that discussion going.

More from the Times-Tribune:

“It’s important to keep the impact fee in place so that communities directly dealing with drilling can still be protected,” said Mr. DiGirolamo. He said lawmakers representing shale counties want to keep impact fees because they are popular with local officials. Local governments use the revenue for road and other infrastructure projects, public safety and environmental purposes.

Keeping the impact fee is viewed as necessary to getting the votes to pass a severance tax in the Legislature.

“Virtually all the discussions I’ve had keep the impact fee in place,” said Sen. John Yudichak, D-14, Plymouth Twp., ranking Democrat on the Senate Environmental Resources and Energy Committee. He has introduced severance tax bills in recent years.

State Rep. DiGirolomo says most of the revenue from his proposed 3.2 percent tax would be split between education and pension obligations, with some portion going toward human services and the environment.

It’s unclear how these proposals will do in the Republican controlled legislature. Drillers have opposed a severance tax, saying with the low cost of natural gas, a tax would curb production. Marcellus producers are now getting about $1 per MMBtu on the spot market, which is the lowest price in the country.

But Pennsylvania is still considered a cheap place to drill.

Some natural gas producers say they’re already preparing to slow down in anticipation of an increased tax. But other things factor into their decisions as well, like the price of natural gas, the volume of gas pumped out of their wells, and their connections to pipelines.

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