A new year, a new round of gas severance tax proposals

Marie Cusick

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Marie Cusick was the Harrisburg reporter for StateImpact Pennsylvania.

January 23, 2017 | 1:13 PM

As a new legislative session gets underway in Harrisburg, lawmakers are once again hoping the Marcellus Shale industry will help solve the state's fiscal woes.

Marie Cusick/ StateImpact Pennsylvania

As a new legislative session gets underway in Harrisburg, lawmakers are again hoping the Marcellus Shale industry will help solve the state's fiscal woes.

State lawmakers are back in Harrisburg this week, and not surprisingly, they’re looking at levying new taxes on Marcellus Shale natural gas drillers.

As StateImpact Pennsylvania has previously reported, this tax has been debated for years, as lawmakers of both political parties have looked to the gas industry to help alleviate the state’s fiscal woes. This year, Pennsylvania is projected to come up at least $600 million short in revenue, on top of a nearly $2 billion structural deficit.

But with some legislators loath to raise taxes of any kind, and an aggressive lobbying campaign by the industry, the gas tax has gone virtually nowhere. Pennsylvania remains the only major energy-producing state that doesn’t levy a tax on extraction. Instead, drillers pay an impact fee for every well. So far these fees have brought in about $200 million a year, with most of the money going back to the counties and municipalities with the most wells.

So far this year, at least three Republicans from southeast Pennsylvania have put forth proposals. Rep. Kate Harper (R- Montgomery) would levy a tax of 3.5 percent of the gross value of gas at the wellhead, while preserving the current impact fee.

“The cost of meeting our obligations to public education and human services continue to challenge existing resources,” Harper says in a memo to her fellow legislators. “We should discuss and debate a severance tax before even considering raising income or sales taxes.”

Rep. James Santora (R- Delaware) intends to introduce a 4 percent tax, while also preserving the impact fees. He wants all the money to go into a “Severance Tax Education Fund,” to expand opportunities for children. Sen. Robert Tomlinson (R- Bucks) is proposing a 5 percent tax, which would be used to support the heavily indebted public pension system.

Democrats Rep. Mike Sturla (Lancaster) and Rep. Scott Conklin (D- Centre) are also proposing taxes ranging from 4 to 9 percent. Sen. Daylin Leach (D- Delaware) wants a temporary tax on gas extraction to help students pay for college.

Gov. Tom Wolf, a Democrat, made taxing the gas industry a central campaign pledge, but he was unable to get a tax during his first two years, amid opposition from the Republican-led legislature. Wolf recently said he intends to ask for a severance tax again, when he gives his annual budget address February 7. Wolf hasn’t said what tax rate he will propose, but hinted that it may be sensitive to the price of gas.