Lawmakers discuss Marcellus Shale benefits
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Lawmakers discuss Marcellus Shale benefits
By JIM DINO (Staff Writer)
Published: October 3, 2010
The Marcellus Shale natural gas drilling project has the potential to ease Pennsylvania’s $3 billion budget deficit next year, but taxes and fees derived from the gas also have to protect the environment, local lawmakers said Friday.
State Reps. Eddie Day Pashinski, D-121; Neal Goodman D-123; Jerry Knowles, R-124; and Tim Seip, D-125, answered questions from members of the Northeastern Pennsylvania Manufacturers and Employers Association on Friday at Top of the 80s in West Hazleton.
Legislators were questioned on four topics: the 2011 budget deficit, taxes, transportation and energy.
Goodman started off by painting a bleak budget picture.
“Next year, we will have a minimum $3 billion budget deficit,” Goodman said. “The $2 billion from the Obama stimulus goes away, and there’s $850 million in medical malpractice in this year’s budget that may not be coming from the federal government. And we are $1 billion short on road and bridge money. It will be like this as long as the economy stays where it is.”
Pashinski said there are only five states in the black. “They are all energy-producing states,” Pashinski said.
And now, with the Marcellus Shale project, Pennsylvania will also become an energy-producing state, Pashinski said.
Pennsylvania must assess a severance tax, a tax on the gas that comes out of the ground, he said.
“Marcellus Shale is one of the richest gas fields in the world,” he said. “There are trillions of cubic yards of gas.”
A severance tax is in the natural gas industrial business model in every state except Pennsylvania, Pashinski said.
The House approved a bill last week setting a significant tax rate at 39 cents per thousand cubic feet, or mcf, of natural gas at the wellhead. Senate Republican leaders have proposed setting a severance tax rate at 1.5 percent during the first five years of a well’s operation before a 5 percent rate kicks in.
Goodman said he expected the tax – once the House and Senate get together on the issue – to end up being between 5 and 7 percent.
But he cautioned a good chunk of the money has to go to ensuring environmental protection, including hiring state Department of Environmental Protection inspectors.
Our area should have learned from what the coal industry did to the local environment, Goodman said.
“This is coal revisited,” Goodman said. “In the early 1700s, coal operators wanted to come in, and said ‘if you don’t let us come in, we’ll go to Kentucky or West Virginia, and come back here later.’
“But look at what happened. I know a place in Girardville where orange water oozes out of the ground.
“We are the Saudi Arabia of gas,” Goodman said. “This project will create 111,000 jobs. We have to be careful.”
Knowles said the tax should be fair.
“There are 23 to 28 shale deposits in the country,” Knowles said. “We don’t want them to abandon this project. These jobs start at $20 to $22 per hour. They are good jobs.”
One problem is, Pennsylvania residents are not trained or experienced enough in the field to get the jobs right now.
“They took an old valve plant in Bradford County and turned it into classrooms,” Knowles said. “We have to work with community colleges to increase the training.”
The taxes and fees from Marcellus Shale will raise an estimated $1 billion a year. While some want to put all of it into the state’s general fund, Seip wants to put half in the general fund, and the other half into transportation – mass transit, roads and bridges.
Seip suggested revamping the state’s sales tax law to tax more goods and services – raising $6 billion to $7 billion – to fund road and bridge repairs, and to replace the property taxes on primary homes.
“The sales tax law has not been revised since 1971,” Seip said.
His so-called Sales-tax Modernization Addressing Real Tax equality plan, or SMART plan, would subject the following items to the state’s 6 percent sales tax: Newspapers and magazines, advertising, catering, investment consulting, scientific research, and admission to theaters, museums and sporting events. High school sports would be exempt.
The legislators said property owners do get gaming funds toward reducing property taxes but often don’t realize it because the rebate comes in the form of a property tax reduction.
The legislators said Pennsylvania benefits much more than other states with gaming.
“New Jersey gets 9 cents on every gambling dollar, while Pennsylvania gets 55 cents,” Pashinski said. “About 34 cents goes into the general fund, 12 cents to save the equine industry, 5 cents toward tourism, the state’s second-largest industry, and 4 cents to local governments.”
Pashinski and Goodman said their constituents receive a $200 rebate on their property taxes every year from gaming.
Goodman said the 12 cents toward the equine industry is money well spent.
“We saved about 40,000 jobs and created another 8,000, (in the gaming industry)” Goodman said. “Dealers are making $35,000 to $40,000 a year.”
jdino@standardspeaker.com