Marcellus Shale tax payments in spotlight
http://standardspeaker.com/news/marcellus-shale-tax-payments-in-spotlight-1.1140777
BY ROBERT SWIFT (HARRISBURG BUREAU CHIEF)
Published: May 3, 2011
HARRISBURG – The natural gas drilling industry has paid more than $1 billion in state taxes since the exploration of the Marcellus Shale formation got under way in 2006, according to an analysis released Monday by the state Revenue Department.
However, a Democratic senator found Marcellus Shale drillers have registered some 500 subsidiary corporations in Delaware during the past five years to take advantage of a Pennsylvania tax loophole.
Sen. Christine Tartaglione, D-2, Philadelphia, said on Monday that the subsidiaries have been created using the so-called Delaware loophole that legally allows Pennsylvania businesses headquartered in other states to avoid paying the state corporate income tax on their operations here. The senator based her estimate on her own research of public records in Delaware.
Tartaglione called on Revenue Secretary-designate Dan Meuser to audit the tax return filings of Marcellus Shale firms as they relate to expenses and deductions claimed for Delaware companies. She was joined by several colleagues, including Sen. John Blake, D-22, Archbald, who said they want the Republican-controlled General Assembly to consider closing the Delaware loophole as part of the next state budget.
Tartaglione has introduced legislation to end that practice with “combined reporting,” a mechanism that would require businesses to add together the profits of parent firms and subsidiaries that are integrated economically when filing tax returns. Businesses would pay taxes on an apportioned share of the combined income of the entire corporate group.
“When 70 percent aren’t paying the tax, that’s a violation of every other taxpayer that’s paying the burden,” said Blake.
He said that ending the loophole would enable the state to lower the CNI tax rate, currently at 9.99 percent, by 25 percent.
Business groups have said that combined reporting will make Pennsylvania less competitive because international firms will be reluctant to subject their entire operations on a worldwide scale to state taxes.
Meuser said he has been given clear authority by the governor to enforce state tax laws to discourage tax evasion. He also emphasized the importance of reducing the high state corporate net income tax rate of 9.99 percent.
In his department’s analysis of state taxes paid by the natural gas industry since 2006, the $1 billion is in line with the general reports about economic activity in the drilling boom areas in Northeast Pennsylvania and other sections of the state, said Meuser.
Industry tax payments are growing at a quick rate, said Mr. Meuser. He said that 857 oil and gas companies and their affiliates paid a total of $238 million in state taxes (corporate income, sales, capital stock and franchise and employer withholding) through April. The total state taxes paid by these companies in 2010 was $218 million.
The analysis is based on taxes paid by drilling firms and their subsidiaries, direct suppliers, pipeline companies and distributors, he added.
The analysis attributes $214 million in state personal income taxes paid since 2006 to lease payments going to landowners, royalty income and sales of assets.
Gov. Tom Corbett ordered the analysis shortly after taking office. It appears as debate intensifies at the statehouse over whether the gas industry should be subject to a special state tax or local impact fee.
rswift@timesshamrock.com
Williams Production Appalachia has no plans to drill into Utica Shale
http://citizensvoice.com/news/williams-has-no-plans-to-drill-into-utica-shale-1.1140376#axzz1LCf5p0Sg
By Elizabeth Skrapits (Staff Writer)
Published: May 2, 2011
Beneath the deep-lying Marcellus Shale lies the even deeper Utica Shale, a rock formation that geologists say also has the potential to be rich in natural gas.
However, nobody is tapping into it in Northeastern Pennsylvania just yet, and the Utica remains largely unexplored in the rest of the state.
The state Department of Environmental Protection issued Williams Production Appalachia LLC a permit on Feb. 4 to drill deeper for its exploratory well on Route 487 in Sugarloaf Township, Columbia County, past the Benton Foundry.
The permit sparked rumors Williams planned to drill into the Utica Shale, but company spokeswoman Helen Humphreys says they’re not true.
“I know that we are not going into the Utica Shale at all,” she said.
The plan is to drill down past the Marcellus Shale to tap into the Onondaga limestone formation beneath, then go back up into the Marcellus, Humphreys said. The well has been drilled and the next step will be to hydraulically fracture it, but she said she didn’t have a date for when it will be done.
A map issued by DEP on April 5 shows that, like the Marcellus, the Utica Shale runs completely through Northeastern Pennsylvania including Luzerne, Lackawanna, Wyoming and Columbia counties.
Although DEP keeps track of Marcellus Shale drilling permits, the Utica is still pretty much off the radar for the state agency.
“We don’t have anything really identifying the formation in our system right now,” said Dave English of the DEP Bureau of Oil & Gas Management. “Basically all we’re tracking at this point in time is the Marcellus.”
There have been permits issued for the Utica Shale – although not many, and none in Northeastern Pennsylvania – and there are several other shale formations being tested, English said.
Range Resources, the first company to drill a Marcellus Shale well in Pennsylvania, in 2004, is a pioneer in the state’s portion of the Utica Shale as well.
Last year, the company drilled a productive well in Beaver County. Range Resources President and Chief Operating Officer Jeffrey Ventura reported in an April 27 conference call the company is planning a second horizontal well in the Utica Shale later this year.
eskrapits@citizensvoice.com, 570-821-2072
Commentary: Pa. Gov. Tom Corbett ignores critics, stays course
http://www.pennlive.com/midstate/index.ssf/2011/04/commentary_pa_gov_tom_corbett.html
Published: Friday, April 29, 2011, 9:27 AM
By Laura Vecsey
Commentary: Pa. Gov. Tom Corbett ignores critics, stays course
And on the 101st day of his reign, Gov. Tom Corbett told state colleges they could solve their budget problems by drilling for natural gas in deposits under their campuses.
Can’t wait to hear what Joe Paterno will say about having to design a new offense to work around a drill rig on the 15-yard line. There could be gas under Penn State, which could be renamed “Marcellus U.,” according to Corbett’s line of thinking.
If there’s one, clear example why Pennsylvania’s new governor is not exactly excelling at crowd-pleasing, his suggestion Thursday about campus drilling says it all.
With such outlandish flouting of public sentiment about drilling and an extraction tax on natural gas, people might be thinking: What IS Tom Corbett thinking?
Here’s a guess: “Polls, schmolls.”
So what if the new governor’s approval ratings are in the tank?
Who cares that a chunk of people who voted for him regret their decision?
He could be Attila the Hun and guess what? It doesn’t matter.
He’s not running for office now. He won. He’s in for another three years and eight months, which is about six lifetimes for a politician, maybe nine.
Critics are calling him One-Term Tommy. But what if he turns out to be Nine-Lives Corbett?
“We may disagree with his choices and the random nature of his choices, but no one can dispute what he’s up against,” Philadelphia political strategist Larry Ceisler said.
“He is what we think he is. He’s not a showboat. He’s a prosecutor who I don’t think has yet to make the transition to leader, so it will be interesting to see if that transition takes place over the next three years. Can you teach an old dog new tricks?” Ceisler said.
Most political analysts insist it’s too soon to tell about Corbett, even as he polarizes voters over his backing of school vouchers and his refusal to impose an extraction tax on natural gas in the Marcellus Shale — a confounding stance given that shale drillers expect a tax.
“First impressions of new governors are usually not lasting impressions for most Pennsylvania voters,” said G. Terry Madonna, the Franklin & Marshall political analyst.
“In fact, Corbett seems to be playing out a familiar script in his first year in office. With few exceptions, Pennsylvania governors in recent history have had a rocky first year in office, always fail to impress the voters that first year and are always re-elected three years later.”
Since 1970, all but one modern governor has had a turbulent initial year in office — a year so tempestuous each of them was labeled a one termer early on, Madonna said.
“Yet each of them was also re-elected comfortably. The only governor to have a tight re-election campaign, Dick Thornburgh, was also the only governor to have a solid first year.”
Still, Corbett’s ratings are historically low.
A Quinnipiac Poll this week found that 37 percent of voters disapprove of Corbett’s job as governor, compared with 11 percent disapproval in the group’s Feb. 16 survey, tripling Corbett’s disapproval rating since he unveiled his budget.
Thirty-nine percent of those surveyed approve of the job Corbett is doing.
Last week, Public Policy Polling showed that among independents, Corbett only has a 31 percent approval rating. In November, Corbett won the independent votes by 18 percentage points over Democrat Dan Onorato.
But for the new governor who was swept in during a national surge favoring conservative Republicans, this is exactly the time to be spending some political capital.
“Corbett is smart to make the hard choices now, early in his administration,” said former Dauphin County Commissioner Lowman Henry of the Lincoln Institute.
“If he can get the budget balanced, improve the state’s business climate and the economy improves, the election is three and a half years away and he can take credit for having made the tough choices and putting us back on the right track.”
Henry said the current recession is so severe government and its programs cannot escape the ill effects.
“We can’t afford double- and triple-the-rate-of-inflation increases in education spending any more, and so the gravy train is over. That is bound to incite the special interests, but grass-roots taxpayers are pleased he is finally cutting off the never-ending flow of money,” he said.
Still, it’s interesting to see some Pennsylvania voters recoil at their gubernatorial choice. Corbett’s Facebook page contains myriad appeals to the former attorney general about his agenda, which includes increased prison funding while slashing education, including higher ed.
“Governor Corbett, I voted for you but I am starting to regret my decision,” said Chad Germer, an auto technician from Elizabethtown.
“You need to re-think your education cuts and the lack of taxing all the well-drilling companies who are destroying the natural beauty of our state. If you ever would like to have a conversation with one of your voters, look me up.”
Corbett does not have a knack for cozy chats with voters, or the media. But after a hands-off approach that has startled even top-ranking Republican leaders, Corbett has started to make the rounds to sell his budget.
On Wednesday, Corbett spent his 100-day anniversary in Pittsburgh touring Google.
“My budget is a commitment to Pennsylvania’s workers,” Corbett said.
Corbett’s budget would cut state spending by 3 percent. He has taken his no-tax pledge so seriously that he has yet to flinch on his opposition to an extraction tax.
“Where the state can help, we’re here to help. And where we can keep out of the way, we will.”
Corbett might not be very appealing, but it’s unlikely he cares. Not now.
Senator proposes per well impact fee
http://citizensvoice.com/news/drilling/senator-proposes-per-well-impact-fee-1.1139222#axzz1Kowy0Mfv
By Robert Swift (Harrisburg Bureau Chief)
Published: April 29, 2011
HARRISBURG – A top Senate Republican leader unveiled a proposal Thursday to levy a fee on each producing Marcellus Shale well to help local governments offset the impact of costly drilling activities.
Senate President Pro Tempore Joseph Scarnati, R-Jefferson County, wants to levy a base $10,000 fee annually on each well. The base fee would be adjusted for increases in the volume of natural gas produced and price of gas (currently at $4.25 per 1,000 cubic feet) on the market. The senator outlined a scenario where the base fee could quickly increase to $25,000 per well.
Scarnati wants to make the fee retroactive for 2010 production. He estimates the fee could generate $121 million by March 1 and potentially $150 million in 2014 as more wells are drilled.
Revenue distribution
The senator would give the state Public Utility Commission the job of collecting the per-well fee and distributing revenues.
Up to 60 percent of the fee revenue would go to municipalities and counties with producing wells under the proposal, as well as to other municipalities in that county. Within that breakdown, 36 percent of revenues would go to counties with producing wells, 37 percent to municipalities with wells and 27 percent to neighboring municipalities in those counties.
Local officials could use the revenue to maintain and repair roads and bridges, improve wastewater and sewage plants, protect water resources and assist local emergency services.
The remaining 40 percent would go to environmental and infrastructure projects overseen by the Commonwealth Financing Authority and to county conservation districts.
Some parts of the proposal are still being developed, such as a requirement that a municipality receiving impact fee revenue not adopt zoning ordinances more restrictive than a model zoning ordinance, to be drawn up by the PUC. It’s unclear whether the model ordinance would address such issues as a set-back for wells from water sources.
Debate in state
Scarnati’s long-awaited fee proposal marks a major development in a statehouse debate stretching back several years on what benefits should accrue to Pennsylvania citizens from the development of the deep pockets of natural gas in the Marcellus Shale formation.
He offered this proposal as an alternative to a state severance tax on natural gas production. Pennsylvania appeared on the brink of enacting a severance tax last year, but prospects faded greatly when Gov. Tom Corbett who campaigned against a severance tax took office in January.
Scarnati’s proposal appears following months of painstaking behind-the-scenes negotiations and at a strategic moment just before the Republican majority legislative caucuses offer counterproposals to Corbett’s proposed $27.3 billion state budget.
Scarnati said the specter of looming state spending cuts in education and social programs to address long-term deficits makes it imperative for lawmakers to act on impact fee legislation at this time. He said his sense is that the public won’t accept budget cuts if there is no impact fee on the natural gas industry.
“I don’t see how we can get the budget process done with all the cuts that are occurring across so many different lines without addressing an impact fee for this industry,” he added.
Scarnati said his proposal is crafted to meet the governor’s stipulation about fee revenue not going to the state General Fund. The governor is waiting for recommendations about an impact fee from his Marcellus Shale Advisory Commission.
“This proposal is well-timed, because our communities need a decision on this matter soon,” said Sen. Lisa Baker, R-Lehman Township. “The distribution of the revenue derived is probably the best yet in terms of addressing community and environmental impacts.”
Sen. John Yudichak, D-Nanticoke, called the proposal a serious one which recognizes that gas companies must pay a fair share. But he expressed concerns about its limited revenue potential. Yudichak recently introduced a severance tax bill.
House Minority Leader Frank Dermody, D-Pittsburgh, said the proposal falls short of what a severance tax would yield.
“This weak alternative is certainly not enough to protect the environment and ensure clean drinking water,” he added.
Scarnati’s proposal drew support from the County Commissioners Association of Pennsylvania. But Myron Arnowitt of Clean Water Action said the proposal is troublesome because municipalities would have to give up their zoning rights to receive fee revenue.
rswift@timesshamrock.com
Corbett says colleges could drill for cash
http://www.timesleader.com/news/Corbett_says_colleges_could_drill_for_cash_04-28-2011.html
Posted: April 29, 2011
Six of the 14 state campuses in Pennsylvania are located on Marcellus Shale formation.
Gov. Tom Corbett speaking at the Greater Scranton Chamber of Commerce.
EDINBORO — Some Pennsylvania universities should consider drilling for natural gas below campus to help solve their financial problems, Gov. Tom Corbett said Thursday.
The Erie Times-News reported that Corbett made the suggestion during an appearance at a meeting of the Pennsylvania Association of Councils of Trustees at Edinboro University.
Corbett said six of the 14 campuses in the Pennsylvania State System of Higher Education are located on the Marcellus Shale formation, part of a vast region of underground natural gas deposits that are currently being explored and extracted.
The Republican governor’s proposed budget for the fiscal year that starts in July would cut $2 billion from education and reduce aid to colleges and universities by 50 percent. The newspaper said Corbett emphasized the cuts are only proposals and that funding for education could change as he negotiates the budget with state lawmakers.
The Marcellus Shale formation lies primarily beneath Pennsylvania, New York, West Virginia and Ohio; Pennsylvania, however, is the center of activity, with more than 2,000 wells drilled in the past three years and many thousands more planned.
Drilling for gas in deep shale deposits is emerging as a major new source of energy that supporters say is homegrown, cheap and friendlier environmentally than coal or oil.
But shale drilling requires injecting huge volumes of water underground to help shatter the rock — a process called hydraulic fracturing. Some of that water returns to the surface, in addition to the gas, in the form of ultra-salty brine tainted with metals like barium and strontium, trace radioactivity and small amounts of toxic chemicals injected by the drilling companies.
Most big gas states require drillers to dump their wastewater into deep shafts drilled into the earth to prevent it from contaminating surface water. Although it has moved to limit it, Pennsylvania still allows hundreds of millions of gallons of the partially treated drilling wastewater to be discharged into rivers from which communities draw drinking water.
Pennsylvania’s governor outlines what he won’t let companies drilling for gas do.
http://www.timesleader.com/news/Corbett__No_forced_pooling_04-27-2011.html
Posted: April 27, 2011
Corbett: No forced pooling
MARC LEVY
PITTSBURGH — Gov. Tom Corbett told a crowd from the region’s booming natural gas industry Tuesday that Pennsylvania needs its help to climb out of the recession, but he also warned that he would aggressively enforce environmental laws and that he opposes a controversial change in law sought by drilling companies.
“Forced pooling” is tantamount to private eminent domain, and he doesn’t agree with it, Corbett told the seminar crowd in suburban Pittsburgh, which is a fast becoming a hub for multinational energy companies exploring the Marcellus and Utica shales beneath Pennsylvania, Ohio and West Virginia.
“I’m sure there’s many here, many here that would like to see” forced pooling for Marcellus Shale gas, he said. And then he told what he called “maybe a dirty little secret” about companies that say they would be willing to pay a severance tax that is the subject of much debate in the state Legislature.
“They never add the caveat that I know that many of the companies that have gone to Harrisburg have said, ’Yeah, we’ll take the tax if we get certain things in regulation, including the forced pooling,’” Corbett said.
Forced pooling is on the books in some other states and can be used to force holdout landowners to lease their below-ground gas rights under certain conditions. The issue, at the top of the industry’s wish list since at least last year, has gained little traction in the Legislature. Companies say it would help limit the number of roads and wells built to extract gas.
Corbett also opposes a severance tax on gas extracted from the Marcellus Shale, the nation’s largest-known gas reservoir.
On Tuesday, he reiterated his stance against it, and tried to underscore the urgency of competing for the industry’s money and equipment. The Marcellus Shale beneath Pennsylvania is one of six natural gas deposits vying to offer the best return on investment for energy companies, he said.
“I need, we need, Pennsylvania needs the jobs today to get out of this recession,” he said.
Pennsylvania is the nation’s largest natural-gas producing state that does not tax the activity.
Corbett, who said the media would call Tuesday’s crowd of several hundred a “friendly audience,” accepted nearly $1 million in donations to his gubernatorial campaign from people in the natural gas industry.
However, he closed his 35-minute speech by promising to vigorously enforce environmental laws and saying he will use his power to grant drilling permits to punish companies, if necessary.
“I know how to get the attention of your CEOs, whether they be here in Pennsylvania or in Oklahoma or in Texas or in Louisiana, and that’s through the permit,” Corbett said.
He spoke a week after he asked natural gas drillers to stop one of their most troubling environmental practices: taking polluted wastewater from gas wells to riverside treatment plants that aren’t equipped to remove all the contaminants.
The audience heard numerous warnings about losing the public relations battle over the industry’s environmental record and the possibility of stronger regulations, both on the federal level and in states from Texas to West Virginia.
Drawing gas from shale deep underground is being touted by the industry as a major new source of cheap, homegrown energy, thanks to the recent combination high-volume hydraulic fracturing and the new technique of horizontal drilling. Nearly 3,000 wells have been drilled in Pennsylvania’s Marcellus Shale.
However, hydraulic fracturing, or fracking, has sparked concern from some environmental groups and public officials, particularly as people in drilling communities in Texas, Pennsylvania and elsewhere come forward with tales of contaminated air and well water. It also has drawn scrutiny from the U.S. Environmental Protection Agency.
Drillers escape taxes, group says
http://standardspeaker.com/news/drillers-escape-taxes-group-says-1.1137967
By robert swift (Harrisburg Bureau Chief)
Published: April 27, 2011
HARRISBURG – The vast majority of natural gas drillers in Pennsylvania don’t pay the state corporate income tax and benefit from federal tax incentives and state tax breaks, according to a report issued Tuesday by a Harrisburg think tank.
The report by the Pennsylvania Budget and Policy Center is more fodder for the statehouse debate over whether the companies that produce natural gas in the Marcellus Shale boom should be subject to a special state tax or local impact fee levied by municipalities. Gov. Tom Corbett has steadfastly opposed a severance tax saying it will drive investment to other states. Republican senators plan to outline an alternate local impact fee proposal later this week.
The budget and policy center is a Harrisburg-based think tank that advocates tapping new state revenue sources, including a severance tax, to address Pennsylvania’s fiscal problems.
Most gas drillers structure their business as partnerships so they can instead pay the much lower state personal income tax, the report said. The state corporate income tax rate is 9.99 percent, while the state personal income tax rate is 3.07 percent.
A number also take advantage of the so-called Delaware loophole that allows businesses headquartered in other states to avoid paying the corporate income tax on their operations here, according to the report.
The federal incentives, such as allowing write-offs for a large portion of drilling and well-completion costs, make substantial dents in a driller’s taxable income, the report said.
rswift@timesshamrock.com
Corbett opposes ‘forced pooling’ of natural gas
Governor speaks at industry seminar as Senate leader gets ready to introduce impact fee bill.
http://www.mcall.com/news/local/mc-pa-senate-impact-fee-20110426,0,6499620.story
Gov. Tom Corbett said he is opposed to “forced pooling,” which would give the Marcellus Shale gas well industry the right to drill under and take gas from a property owner that has not signed a lease.
The pooling of gas drilling rights, which is at or near the top of the industry’s wish list, amounts to the use of eminent domain for private interests, the governor said.
The comments on forced pooling were made at the K&L Gates fourth annual Appalachian Basin Oil and Gas Seminar in Green Tree, Allegheny County, an event that drew about 400 people, many from industry and law firms.
“Private eminent domain, I don’t think that’s right,” Corbett said. “I was made aware that it’s on the industry’s wish list, but I don’t agree. If I see a bill that contains forced pooling, I won’t sign it.”
Corbett also repeated his opposition to a severance tax on Marcellus gas extraction.
His speech comes a day after workers were able to replace a damaged wellhead on a Bradford County gas well following last week’s blowout and wastewater spill.
Officials from Chesapeake Energy, who operate the Leroy Township drilling site, announced the completed repairs Monday night. The malfunctioning wellhead was part of the cause of last week’s accident, according to Chesapeake.
While briny wastewater spilled into a nearby creek tributary during the early hours of the incident, both the company and state Department of Environmental Protection have reported no significant impacts so far. DEP officials said Monday they did not have results yet from last week’s water sampling, and were doing additional testing this week.
As investigations by DEP and U.S. Environmental Protection Agency officials get under way, Chesapeake said its employees will continue to work with regulators on determining the cause of the equipment failure.
Neither state nor federal environmental regulators have indicated what potential penalties could be imposed on the company, but both are seeking information on what happened and the chemicals in the water that was released.
Meanwhile, the top Republican in the state Senate says he’ll unveil the “broad parameters” of a local impact fee on natural gas drillers on Thursday — the day after the Corbett administration’s own shale study panel meets to likely discuss the issue.
Senate President Pro Tempore Joe Scarnati, R-Jefferson, said he’ll hold a 9:30 a.m. conference call Thursday to outline the fee, which would be used to help municipal and county governments deal with the public cost of drilling.
In a brief interview, Scarnati, whose northwestern Pennsylvania district sits in the heart of shale drilling territory, said he’d only offer general details about his proposal, but would not be presenting formal, legislative language.
“It’s not a bill,” he said. “It’s a proposal for feedback.”
Scarnati’s chief of staff, Drew Crompton, said his boss would not be speaking for his caucus Thursday. A more formal proposal on behalf of Senate Republicans would come later.
“We’ve tried to incorporate everyone’s concerns,” Crompton said.
On Monday, Corbett said he’d be willing to look at whatever proposal lawmakers send him. In the past, the Republican has been adamant that none of the money raised from the fee go into the state’s general fund budget.
Jan Jarrett of the environmental group PennFuture said she’s sticking by her preference for a severance tax on drillers, arguing that the impacts from drilling reach far beyond the drilling area.
Jarrett said she favors a severance tax proposal put forth by Rep. Greg Vitali, D-Delaware, that would split the tax money three ways among local governments, the general fund budget and the Growing Greener environmental program.
Jarrett said she wants to “make sure all Pennsylvanians benefit from drilling.”
Such a scenario seems unlikely. Corbett has said he will not sign a severance tax bill.
Morning Call Harrisburg Reporter John L. Micek and Don Hopey and Laura Olson of the Pittsburgh Post-Gazette contributed to this story.
Tax paid by drillers disputed
http://www.timesleader.com/news/Tax_paid__by_drillers__disputed_04-27-2011.html
Report stating group pays little in fees uses faulty data, say those in industry, Pa. official
Posted: April 27, 2011
STEVE MOCARSKY smocarsky@timesleader.com
Making a case for a severance tax on natural gas in Pennsylvania, a research and policy center on Monday released a report showing that natural gas drillers in the state pay very little in state and local taxes, despite industry claims to the contrary.
Many drillers – including nine of the top 10 permit holders in the Marcellus Shale – structure their businesses as limited liability companies (LLCs) or limited partnerships (LPs).
This allows them to avoid the corporate net income tax altogether and pay the much lower personal income tax on company profits, according to a report by the Pennsylvania Budget and Policy Center.
Only 15 percent of the 783 companies to file state corporate net income tax returns owed any tax, netting the state $17.8 million. About half of the companies that had to file tax returns for capital stock and franchise tax had to pay any tax, which totaled $8 million. The state collected another $13 million in personal income taxes from drillers, bringing the grand total to $38.8 million that year, the report states.
In 2009, oil and gas drillers in Louisiana, Texas and West Virginia – states that have severance taxes – paid considerably more in state and local taxes than they did in Pennsylvania. Drillers paid $44 million in Pennsylvania sales and business taxes, while, in Texas, they paid $8.8 billion in drilling, property, sales and corporate taxes, according to the report.
“Texas has about 34 times as much oil and gas drilling as Pennsylvania, but took in 200 times as much in taxes from the industry,” said Sharon Ward, center director. “Clearly, drillers are getting big tax breaks in Pennsylvania that they don’t enjoy anywhere else.”
The report seems to debunk a statement by former Gov. Tom Ridge, now a board member of the natural gas industry’s Marcellus Shale Coalition, who said the industry “helped the state generate more than $1 billion in revenue to state and local governments.”
But Elizabeth Brassell, spokeswoman for the state Department of Revenue, said the report is “a narrow look at old tax data” and used “less than ideal research methodology.”
Brassell said the report was based on data the department provided a year ago, and the department has since identified better research methodologies.
Brassell said some of the information in the report is either “blatantly wrong or misrepresented.” For example, the assertion that only $13 million was paid by the industry in personal income taxes must be based on “faulty information,” she said, “because we can’t get that figure anywhere.”
In response to the claim that many companies structure as LLCs to avoid paying corporate taxes, Brassell said the department is finding “a number of cases” in which LLCs are owned by corporations rather than individuals and, in those cases, the corporations are paying “substantial” income taxes.
“In looking at it, state taxes paid by the industry so far in 2011 are already nearly exceeding what the industry has paid in all of 2010 and we’re totaling collections in the hundreds of millions annually rather than the tens of millions,” Brassell said.
Travis Windle, spokesman for the Marcellus Shale Coalition, said that according to independent Penn State University experts, Marcellus production generated nearly $785 million in tax revenues through 2010 in Pennsylvania while helping to create more than 88,000 new jobs.
“Further, a more recent Penn State analysis clearly demonstrates that state sales tax revenues, realty transfer tax collections, as well as overall tax income continue to soar in Marcellus producing counties,” Windle said, adding that tax income increased 325.3 percent in counties with 10 or more wells.
Steve Miskin, press secretary for House Majority Leader Mike Turzai, R-Allegheny, said the industry is creating “good-paying” jobs, the companies and employees are paying taxes and the companies are fixing roads and making other improvements.
State Sen. John Yudichak, D-Plymouth Township, on the other hand, supports a severance tax. In March, he introduced Senate Bill 905, which would evenly distribute severance tax revenue between the Commonwealth Financing Authority for water supply, wastewater treatment, stormwater and flood control projects; the Environmental Stewardship Fund; and local governments directly affected by natural gas drilling.
Environmental Protection Agency steps into probe of fracking spill
http://www.pennlive.com/midstate/index.ssf/2011/04/environmental_protection_agenc.html
Published: Tuesday, April 26, 2011, 12:00 AM
By DONALD GILLILAND, The Patriot-News
The federal Environmental Protection Agency has thrown an elbow against Pennsylvania regulators in the job to regulate natural gas drilling in the Marcellus Shale.
The EPA announced Monday afternoon that it is investigating last week’s spill of drilling fluids at a Chesapeake Energy site in Bradford County.
Pennsylvania’s Department of Environmental Protection remains the lead investigating agency, but the EPA has asked Chesapeake officials for lists of fracking chemicals used, if any radioactive compounds were in the spill, and what affects there were to drinking-water sources.
“We want a complete accounting of operations at the site to determine our next steps in this incident and to help prevent future releases of this kind,” said EPA Regional Administrator Shawn M. Garvin.
EPA’s action marks “a significant change in approach,” former DEP Secretary John Hanger said Monday.
“The EPA is asserting jurisdiction in a manner that it did not during my time as secretary or prior to this incident,” said Hanger. “It means that the gas-drilling industry in Pennsylvania will be regulated in practice by both DEP and EPA, at least in some cases and respects.”
An EPA spokesman said such information requests are “a common fact-finding tool which we use when necessary,” but they are apparently a first for the agency in regard to the Marcellus Shale.
Much of what EPA would do duplicates what DEP is already doing, and consistency in regulation — be it strict or otherwise — is what the business needs, those in the industry said Monday night. Having two monitors could foster confusion.
“Each and every one of EPA’s questions will be answered by DEP, as required under new state regulations,” said one. “This action is clearly more about politics and grabbing headlines.”
The New York Times recently reported an internal battle within the EPA over whether the agency should intercede in Pennsylvania to clamp down on drilling in the Marcellus Shale.
That coverage was less than flattering for the agency, which some see as hamstrung by powerful industry lobbying.
Nevertheless, the EPA fared better than Pennsylvania regulators, whom The New York Times story portrayed as bumbling and beholden to drilling interests.
The timing of the EPA’s move — last week’s spill involved no injuries, no damage and minimal environmental impact — had some in the industry questioning it.
There might also be personal politics involved. EPA administrator Lisa P. Jackson recently said she had attempted to call Gov. Tom Corbett about regulation of Marcellus Shale, but Corbett never called her back.
Corbett’s news secretary, Kevin Harley, denied that the office received such a call.
Some environmentalists believe Pennsylvania has been too permissive and have been calling for the EPA to step in.
DEP did not address EPA’s entry into the matter directly.
“DEP has been on-site around the clock since the beginning of this incident, and as the regulatory agency, we continue to lead the way, “ DEP spokeswoman Katy Gresh said late Monday.
“DEP issued Chesapeake a comprehensive notice of violation Friday morning, telling the operator to respond to important questions that we have,” she said.
Those questions are similar to those asked by the EPA.
Chesapeake Energy has said an equipment failure caused the drilling brine — also known as fracking fluid — to gush out of the well and overwhelm containment systems. Some of the fluids reached a tributary of the Susquehanna River, but by the following afternoon that was stopped. The well was brought under control Thursday.
David Sternberg, the media officer for EPA’s Region 3 in Philadelphia said: “The information requested includes data on the cause and environmental consequences of this accident. EPA will evaluate this information promptly, in consultation with DEP, and take whatever action is needed to protect public health and the environment.
A Chesapeake spokesman said, “We intend to comply with the EPA’s request for information and have already communicated with the agency about how best to prioritize its requests in relation to the overall and ongoing response efforts.”
Chesapeake voluntarily suspended operations in the Marcellus Shale last week as it investigates the spill.