The less Gov. Corbett wants to talk about a tax on gas drillers, the more it gets discussed

HARRISBURG — Sitting in a state House hearing on Gov. Tom Corbett’s $27.3 billion budget proposal, Charles Zogby reached his boiling point.

Pressed repeatedly on his boss’s opposition to a “severance tax” on natural gas drillers, Corbett’s usually unflappable budget secretary snapped at Democratic members of the House Appropriations Committee.

“We can talk about this until the cows come,” said Zogby, who, with his sharply parted hair and impeccably knotted ties brings an executive’s poise to the coffee-ringed culture of state government. “The governor is not interested in raising taxes. Period.”

But Zogby can only wish it were that easy to shut down debate on a severance tax, a levy on the gas that drillers take out of the ground. With scores of state programs under the knife to close a $4.1 billion budget deficit, the chorus of those unwilling to let the subject drop has grown louder.

“This has become the issue of the moment,” said G. Terry Madonna, a political science professor and pollster at Franklin & Marshall College in Lancaster. “It started out as a regular policy debate, but it grew geometrically into the single most important issue outside of the budget.”

Corbett, who ran on a pledge not to raise state taxes or fees, has made it clear that he will not sign a severance tax into law. But partisans have continued to press their argument, hoping that public opinion, which is already strong, will pressure Corbett into a change of heart.

Those on both sides of the issue agree on this much: The burgeoning natural gas industry represents a massive economic opportunity for modern Pennsylvania in much the same way steel and coal did for previous generations. All concerned say they want to help the industry flourish while protecting the environment. But they differ profoundly on how to pay for that.

For supporters, the argument in favor of a severance tax is a simple one: With drillers making untold billions by extracting natural gas from beneath taxpayers’ feet, there’s no reason Pennsylvania should stand alone among major gas-producing states in not imposing a levy. That’s particularly true, they say, when services for children and the most vulnerable citizens are on the line.

Corbett and tax foes argue that gas drillers already pay other types of state taxes, and that a new levy would force them to move to other gas-producing states where it costs less for them to do business. They also say the industry has been an economic engine in economically stagnant and mostly rural sections of the state.

State Sens. John Yudichak, D-Luzerne and Edwin B. Erickson, R-Delaware, recently rolled out a severance tax proposal. It is at least the second such plan hatched during the new legislative session.

“I think we should have a severance tax on Marcellus gas,” Erickson said. “I do hear him [Corbett] loud and clear on [not raising taxes]; on the other hand,” there are impacts from gas drilling that need to be addressed.

That kind of talk from within his own party has left Corbett, who has crisscrossed Pennsylvania in recent weeks to plug his budget plan, spending time and energy explaining and re-explaining his opposition to the levy.

“The message in the last campaign was clear — no new taxes,” Corbett recently told a statewide meeting of county commissioners. “The people are fed up with taxes.”

But it’s unclear whether Corbett was echoing public sentiment or merely reaffirming his election season vow for his political base.

It is clear state voters don’t want their own taxes raised to preserve cuts in state services. But a majority of voters do support a severance tax.

Sixty-two percent of respondents to a March 17 Franklin & Marshall poll said they strongly or somewhat supported a drilling tax, compared with 30 percent who opposed it. The survey of 521 adults had a margin of error of plus or minus 4.3 percentage points.

“There is virtually no tax that passes [public] muster,” Madonna said. “[A severance tax] is the only [one] that passes muster.”

Another problem for Corbett: Voters aren’t buying his tax-them-and-they’ll-leave argument, said Christopher Borick, a pollster and political science professor at Muhlenberg College in Allentown. And in a year in which Corbett is calling for shared sacrifice from the public, voters are having a hard time understanding why the cash-flush drilling industry isn’t being asked to shoulder some of the burden.

“From a political sale position, that’s an incredibly difficult case to make and the more he makes the case [against], the more he infuriates a lot of people,” Borick said. “If that’s his core argument, it’s not getting a lot of traction.”

Democrats have made the same point.

“It’s absolutely indefensible, as a matter of public policy, that the governor has refused to consider a Marcellus shale tax when other states have this tax and we’re considering other cuts,” said Rep. Greg Vitali, D-Delaware, who raised Zogby’s hackles at that House hearing. “When the people of my district hear that he’s received … donations and refuses to consider a tax, they think he’s in the pockets of the gas companies.”

Corbett has steadfastly rejected any notion that gas drillers gained influence with his office when they pumped hundreds of thousands of dollars into his campaign coffers in 2010. Nonetheless, those donations have created an image problem.

“When they see the donations, it opens you up to criticism,” Borick said. “It doesn’t prevent the public from reaching conclusions that are negative.”

The state House and Senate each passed severance tax proposals last year, but ran out the clock before they could reconcile differences between the two proposals. Gov. Ed Rendell, a Democrat, stood ready to sign a severance levy into law.

Despite Corbett’s opposition to the severance levy, he has expressed a willingness to consider a locally imposed impact fee aimed at helping counties and municipalities cover costs associated with drilling, such as damaged roads. Corbett laid down parameters for his consideration: that such a levy not be called a “tax” and a guarantee that any money raised from it go to local and county governments — not the state’s general fund budget.

“I understand the issue of impacts,” Corbett told the county commissioners. “That’s one of the reasons I have a Marcellus Commission. And we’ll be talking about that. That’s one of the reasons I have my lieutenant governor as chairman. So we can work with you.”

It’s unclear what effect such a fee would have on the question of a severance tax.

April 10, 2011
By John L. Micek, CALL HARRISBURG BUREAU
john.micek@mcall.com
(717) 783-7305
http://www.mcall.com/news/nationworld/pennsylvania/mc-pa-budget-shale-debate-20110410,0,6359202.story