Pennsylvania

Energy. Environment. Economy.

Wolf’s gas tax would be among highest in nation, says Independent Fiscal Office

Workers at a natural gas sites in Washington, Pa. The IFO says Gov. Wolf's proposal would give Pennsylvania one of the highest effective gas tax rates in the nation.

AP Photo/Keith Srakocic

Workers at a natural gas sites in Washington, Pa. The IFO says Gov. Wolf's proposal would give Pennsylvania one of the highest effective gas tax rates in the nation.

Governor Wolf made taxing the natural gas industry the centerpiece of his campaign, and if he gets his way, he could move Pennsylvania from having one of the lowest effective gas tax rates in the country to one of the highest.

That was the analysis presented Monday at a joint senate committee hearing in Harrisburg from the state’s Independent Fiscal Office (IFO). Much like the Congressional Budget Office in Washington D.C., the IFO is tasked with providing nonpartisan analysis for budgetary purposes.

“The proposed severance tax will likely move Pennsylvania from one of the lowest severance tax states to the highest tax state, relative to other major gas producing states,” says IFO director Matthew Knittel.

The IFO analysis examines the effective tax rate on production from a new well drilled in 2018. Assuming an ultimate recovery of between 10-15 billion cubic feet over a 30 year time period, the IFO finds Pennsylvania’s current impact fee translates to an effective tax rate of less than one percent, while Wolf’s proposed severance tax would amount to 7.3 percent. Even though a state like Texas, for example, has a higher statutory rate (7.5 percent), most shale wells get an exemption and don’t pay that. The IFO finds a similar Texas well would pay an effective rate of 3.1 to 3.5 percent.

Wolf is modeling his plan on West Virginia, which taxes both volume and sales. Under his proposal, gas companies would pay a 5 percent tax on the value of the gas, plus 4.7 cents for every thousand cubic feet. It would also set a minimum value of $2.97 per thousand cubic feet, regardless of the actual sale price. Wolf says the tax could generate a billion dollars in its first year, which he’d use to boost funding public education.

Eileen McNulty, acting secretary of the state Department of Revenue, testified on behalf of the administration.

“Natural gas has the potential to fuel not only our homes and truck fleets, but also a world-class education system for our children,” she told senators.

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Marie Cusick/ StateImpact Pennsylvania

Oil and gas industry representatives testified Monday in Harrisburg. From left: Bruce Grindel, PA Grade Crude Coalition, Lou D'Amico PA Independent Oil & Gas Association, and Dave Spigelmyer, Marcellus Shale Coalition.

But representatives from the gas industry, who oppose the tax, were quick to warn legislators it would curb economic growth.

“Make no mistake, we will witness significant major decline in capital outlay in Pennsylvania,” said Dave Spigelmyer, head of the gas trade group, the Marcellus Shale Coalition. “This tax matter could not come at a more difficult time for an industry that’s already under economic pressure.”

The Republican-led committees were largely receptive to the message.

“What’s the one thing we could do to help this industry?” asked Sen. Kim Ward (R- Westmoreland).

“Grow manufacturing,” Spigelmyer replied.

Later on, Sen. Scott Hutchinson (R- Butler) joked that he had considered wearing an ‘I love fossil fuels’ t-shirt to the hearing, ”Because I do,” he said.

Meanwhile, Democrats questioned whether the industry was exaggerating the possible effects of a new tax.

“All the graphs, all the testimony we’ve heard about the decline of the industry is a function of the demand side of the equation,” said Sen. John Blake (D- Lackawanna). ”Because there hasn’t been tax policy driving that decline.”

While skyrocketing output has made the Marcellus Shale one of the most productive energy fields in the world, the glut of gas caused prices to crater. The initial race to drill also outpaced pipeline capacity, leaving wells stranded from potential markets. The industry is in the midst of looking for more ways to utilize the gas– in transportation, electric power generation, and manufacturing.

Comments

  • Maria Schicklgruber

    How does using existing and new pipelines that were built under eminent domain law allow for exporting our Nat Gas ?

    When you export Nat Gas U should build new pipelines from the well heads to
    the export terminals without using eminent domain laws !

    Eminent domain laws are for public good NOT private profit !!!

    • John Q

      Corporations are people dont forget.

      • paulroden

        If corporations are “people,” why aren’t they being arrested for fraud, prosecuted, convict and sent to jail? Why aren’t the CEO’s, President s and vice presidents of banks on Wall Street and polluters like ExxonMobil, being indicted, tried convicted and sent to jail for fraud and violation of environmental pollution laws?

        • John Q

          My thoughts exactly Paul.

        • vforba

          Capitalism is not bad, but just wait until we are completely a socialist nation. You’ll get the picture then.

    • mape_ape

      The Constitution disagrees with you.

    • paulroden

      I thought we needed this gas for our “energy independence” and as a “transition fuel” until renewable energy is ready? This is the gas industry propaganda. All they care about is “maximizing profit,” “cutting costs,” and eliminating labor.” They are not “drilling responsibly, safely and protecting the environment.” The export of natural gas as LNG (liquefied natural gas), requires more pipelines, pumping stations and terminals that will add to global warming, and result in higher natural gas prices, contamination of ground water and land. These LNG terminals, pipelines, pumping stations and ocean going freighters also become prime targets for terrorists.

      • vforba

        We would have energy independence if we used our own resources. Renewable energy is crock don’t kid yourself. You want to know about who is doing all this talk to the Arabs who funded the propaganda of Gasland.

        • Jurisrachel

          You wouldn’t happen to have citations for that latter assertion, would you? (‘Cause I’ve not heard that before.)

          • vforba

            All you have to do is look at the credits at the end of the movie. Here is a quote from the Daily signal as I am sure they won’t let me link stuff
            While left-leaning Hollywood often targets supposed environmental evildoers, Promised Land
            was also produced “in association with” Image Media Abu Dhabi, a
            subsidiary of Abu Dhabi Media, according to the preview’s list of
            credits. A spokesperson with DDA Public Relations, which runs PR for
            Participant Media, the company that developed the film fund backing Promised Land, confirmed that AD Media is a financier. The company is wholly owned by the government of the UAE.

    • vforba

      There were millions of miles of new pipeline put in. Where are you at?

  • William Smith

    Hello Patriots,
    It took the two Major Parties over 35 years to cause all the State Financial Problems. Governor Wolf’s budget looks like more of the same. Find more way and things they can tax, ,,,and give and reduce some taxes and other costs to make it look better than what it is.
    The Republican legislature has been in charge of the State legislature for many years. They never acted to fix or slow down the financial problems that were on there way and coming fast with no end in sight. Then, along come Democrat Governor Wolf with his plan. It looks like it just more of the same things, take some more and give some back. But, over all the years that the Republican Party has and still does,, is Control the legislature has NEVER PRESENTED A PLAN OF THEIR OWN OR EVEN TRIED TO FIX THE MASSIVE PENSION PROBLEM AND THE MASSIVE TAX PROBLEM FACING THE PEOPLE OF PENNA. ALONG WITH MANY STATE COSTS AND FEES. THE REPUBLICAN PARTY WAS MORE CONCERNED ABOUT GOVERNOR WOLF LOOKING BETTER THAN THE REPUBLICAN PARTY.
    WHEN YOU PARTY DOES NOTHING,,,HOW CAN YOU TAKE CREDIT FOR ANYTHING ? THE PEOPLE OF PENNA SHOULD HAVE THE RIGHT TO FIRE YOU.
    YOU PEOPLE ,THE REPUBLICAN PARTY WHO CONTROLLED THE STATE LEGISLATURE AND THE PURSE STRINGS LEFT THE PEOPLE DOWN BY DOING NOTHING AND ALLOWING THESE MASSIVE FINANCIAL PROBLEMS TO GET SO BAD THEY HAVE BECOME “UNSUSTAINABLE ” , YOU FAILED THE PEOPLE AND THE TAX PAYERS OF THIS STATE.
    W.B.Smith, Tea Party

  • Julieann Wozniak

    And we’re putting up with more than our share of environmental damage, not to mention outside interference in our government from outside lobbying groups. I’m getting seriously irritated by that partially truthful AFP propaganda ad and the snide female voiceover actress, who probably doesn’t live here, and its just a paid gig to her.

    The austerity politics imposed by AFP and their GOP shills has seriously damaged our economy while further enriching a few.

    Time for a change.

  • vforba

    This is ridiculous. This is only going to get passed on to the landowners. You can’t educate our kids now with the money it takes. Our school district pays out $15,000/ child to educate them and they still don’t do as well. This guy needs to go.

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