Shale-tax debate heats up

http://www.timesleader.com/news/Shale-tax_debate_heats_up_04-24-2011.html
MARC LEVY
Posted: April 24, 2011

One big unknown is whether House Republican leaders will allow a floor vote.

HARRISBURG — Ready, set and … introduce your Marcellus Shale severance tax bill (or local impact fee bill or whatever you want to call it).

Two Republicans, Senate President Pro Tempore Joe Scarnati of Jefferson County and Rep. Kate Harper of Montgomery County, are preparing to introduce bills on top of at least six others already kicking around the GOP-controlled Legislature, adding fuel to what could be one of Harrisburg’s liveliest debates this spring.

Nearly every Democrat, a majority of Republican senators and at least a dozen House Republicans are expected to support some type of tax or fee on the booming natural gas industry. That makes it seem that something might actually pass, more than two years after then-Gov. Ed Rendell raised the prospect of a tax.

Still, the debate is likely to expose divides, especially among Republicans.

For instance, some Republicans, particularly in moderate southeastern Pennsylvania where there is no drilling, want natural gas money to help underwrite the state’s environmental protection, cleanup and enforcement efforts. But other GOP members want the money to remain in drilling communities, and some oppose a tax or fee outright.

“In my area, you have all of the anxiety (over drilling pollution) and very little of the benefit and that makes for a difficult situation in the Republican caucus,” Harper said.

It also seems clear that any tax or fee that passes would have a lighter touch on the wallets of major international energy companies, including Chevron Corp. and Exxon Mobil Corp., than in most other states. Right now, Pennsylvania is the nation’s largest natural gas-producing state that does not tax the activity.

One big unknown is whether House Republican leaders will allow a floor vote on such a proposal.

“Right now, our goal is an on-time, no-tax budget,” said Steve Miskin, a spokesman for House Speaker Sam Smith, R-Jefferson, and House Majority Leader Mike Turzai, R-Allegheny. “We’re not looking at any new taxes or fees.”

Miskin acknowledged that a number of House Republicans are interested in a tax or fee.

“But if it means Harrisburg doling it out one way or another, there are concerns,” he said.

Another unknown is whether Gov. Tom Corbett would even sign a bill that taps natural gas money to pay for anything more than a locally managed program that addresses the cost of damaged roads or contaminated water.

Efforts to impose a tax or fee to help statewide environmental causes may hit a brick wall if Corbett insists that, in keeping with his campaign pledge not to raise taxes or fees, none of the natural gas revenue may migrate to Harrisburg.

He has said that he will listen to proposals for a local impact fee, and otherwise is letting the discussion happen in the Legislature and on a task force he appointed to assess a range of shale-related issues.

“I believe that people are all over the board on what (a local impact fee) means,” Corbett said Thursday. “But in my mind, you do not bring the money to Harrisburg.”

Sen. Charles McIlhinney, R-Bucks, is a co-sponsor of a bill introduced by Democratic Sen. John Yudichak of Luzerne County, saying it is a fee-based approach that he believes should meet muster with the governor because it pays for the state’s costs to deal with natural gas-related damage and regulation that otherwise is borne, in part, by taxpayers in his district.

“Why is my constituents’ tax dollar paying for cleanups in Cambria County or Tioga County?” McIlhinney questioned. “I’m not saying take tax money out of there and send it to other places in the state, but we should tax it there and make it pay for the damage it causes.”

Yudichak’s bill would assess a severance tax of 2 percent on the shale gas, rising to 5 percent after three years.

Four bills introduced by Democrats — two in the House, two in the Senate — would assess higher tax rates, making them less likely to win support. Another bill, introduced by Republican Sen. Gene Yaw of Lycoming County, would allow property taxes to be assessed on the value of Marcellus Shale wells, as it is on coal and limestone.

Scarnati is revealing little detail about his bill. Harper’s bill would divide money mainly between education, environmental causes and drilling communities. It would assess a severance tax of 1.5 percent for five years, before rising to 5 percent.

“Everybody wants fair taxation and everybody understands that if you let one group off, somebody else has to pick it up,” she said. “The industry, by the way, is paying this tax in every other state and I think they’re expecting it” in Pennsylvania.

She acknowledged that her bill would carry a lower tax rate than some of her allies want, but she said she crafted it that way to garner a veto-proof majority should Corbett try to reject it. And if House Republican leaders refuse to hold a floor vote on it, she said she will try to work with an ally to attach it as an amendment to another bill.

“I’ve been in the Legislature for 11 years,” Harper said. “One thing you learn is there is more than one way to get to a goal.”