Scarnati says natural gas tax would cost Pa. 250,000 jobs

• Reid Frazier
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  Reid R. Frazier is an energy reporter for The Allegheny Front, a Pittsburgh-based public media outlet covering the environment in Pennsylvania. His work has aired on NPR and Marketplace.

More than a month into a budget stalemate between Gov. Tom Wolf and the Republican-led state legislature, the governor and Senate President Pro Tem Joe Scarnati continue to spar over whether to tax natural gas drillers.

Scarnati, speaking on WITF’s Smart Talk Wednesday morning, implied a natural gas severance tax would cost the state 250,000 jobs–a figure deemed “inaccurate” by a Penn State economist.

When asked by Smart Talk host Scott LaMar about state polls showing support for a severance tax, Scarnati replied:

“It depends on how you read the poll. If you want to put 250,000 people out of work, ask the poll on that question. How’s that going to fare in polling?”

When a surprised LaMar asked Scarnati to confirm the large job loss figure, he replied the state already has a severance tax in the form of an impact fee, which brings in more than $200 million a year. Then Scarnati settled on a more generalized job loss scenario.

“If you’re going to take the plan this governor has proposed, you will put people out of work. Unquestionable, you will put people out of work.”

But Tim Kelsey, a Penn State economist who studies the impact of the industry on the state’s economy, questioned Scarnati’s claim.

He said Scarnati’s numbers echo estimates the state used for years, when estimating the number of jobs created by the Marcellus Shale industry, under both Gov. Ed Rendell and Gov. Tom Corbett.

“Those numbers are inaccurate,” said Kelsey. “That estimate includes every truck driver or construction worker in the state, even if their job has nothing to do with gas drilling.” Kelsey said the state’s current estimate of 89,000 jobs in the Marcellus Shale industry, revised under Gov. Wolf, are more accurate.

But that doesn’t mean a severance tax would kill all 89,000 gas jobs.

Pennsylvania is the only major gas-producing state without a severance tax. Kelsey said a severance tax would cost jobs, but Scarnati’s claim a tax would eliminate 250,000 jobs–the equivalent of every job in every industry influenced by the gas industry–was excessive. “To expect the industry to go away if it’s not gone away in other states with a severance tax would not make a lot of sense,” Kelsey said.

Asked to clarify Scarnati’s comments, Drew Crompton, his chief of staff, replied through an email.

“I am not sure anyone knows precisely how many jobs this industry covers in Pennsylvania,” wrote Crompton, “and if we passed the Gov. Wolf severance [tax] plan we could count them one by one until they all left. Senator Scarnati believes that the Wolf severance tax would have a devastating affect (sic) on thousands and thousands of jobs at a time when gas prices are so low.”

Gov. Wolf vetoed a June 30 budget passed by the legislature, which included no severance tax. Since then, Wolf, a Democrat, and the GOP-controlled legislature have been at odds over a handful of issues.

Wolf’s severance tax proposal calls for a five percent tax on the value of the gas, plus 4.7 cents for every thousand cubic feet. His original budget proposal would also base the tax on a minimum value of $2.97 per thousand cubic feet, regardless of the actual sale price.

GOP leaders would like to keep the current $50,000 per-well impact fee the state places on shale gas drillers. Local municipalities and counties with shale gas activities keep a portion of the fee to pay for roads and other impacts from drilling.

On average, the fees have brought in $213 million per year. The state’s Independent Fiscal Office has said the impact fee amounts to one of the lowest effective tax rates on shale gas in the nation, and Wolf’s proposal would give Pennsylvania one of the highest rates.

Earlier in the program, Gov. Wolf said he would continue to stand by his campaign pledges. “We need to be like every other [gas producing] state, (by having) a severance tax,” Wolf told WITF’s Smart Talk host Scott LaMar. Wolf said Texas reaped over $15 billion in severance taxes from its drilling industry last year. Pennsylvania’s severance tax, which Wolf has estimated could bring in $1 billion, by contrast, would be much less.

“I’m asking for a very modest severance tax,” he said.

Wolf has also proposed higher personal income and sales taxes to offset property tax cuts and increase state spending on education.

Speaking during the second half of the show, after Wolf had already left the studio, Scarnati, on the phone, said Wolf’s slate of policies amounted to a “liberal approach to governing” through “massive tax increases, and…massive spending.”

Scarnati said he thought Wolf needed to compromise more on issues of liquor privatization and public employee pension reform.

“He refuses to move out of, in my opinion, out of campaign mode and into governing mode,” said Scarnati. “I recognize he made some campaign promises, some of them I think he regrets making, but his campaign promises can’t become Pennsylvania’s nightmare.”

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