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.
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.
Penn State study assesses state taxes on Marcellus Shale production
http://live.psu.edu/story/52988#nw69
Thursday, April 21, 2011
University Park, Pa. — The ongoing utilization of Pennsylvania’s Marcellus Shale natural gas deposits has the state weighing the pros and cons of taxing the drilling activity. A study recently released by Penn State’s College of Agricultural Sciences used state tax information in an effort to begin an objective analysis of the drilling’s impact on local economies and state tax collection.
The research, summarized in a four-page booklet titled “State Tax Implications of Marcellus Shale: What the Pennsylvania Data Say in 2010,” compared counties where there is Marcellus Shale drilling and production activity with non-Marcellus counties. The study was authored by Timothy Kelsey, professor of agricultural economics and Penn State Extension state program leader for economic and community development, and Charles Costanzo, an undergraduate student majoring in community, environment and development.
Data are drawn from the Pennsylvania Department of Environmental Protection’s report, “2010 Wells Drilled by County as of 02/11/2011,” as well as from the Pennsylvania Department of Revenue’s “Personal Income Statistics for 2007 and 2008” and its “Tax Compendium (2007-08 through 2009-10) with Statistical Supplements.”
Kelsey said while it’s still early in the natural gas drilling process, the analysis indicates that Marcellus Shale development brings some positive economic activity for communities.
The study found that state sales tax collections were up by an average of 11 percent in counties with major Marcellus activity, while collections dropped an average of more than 6 percent in counties without any Marcellus. Sales tax collections are an indicator that retail sales are booming in Marcellus counties.
“Tax revenues are only one side of finances, however, so this analysis only considers half of the issue,” Kelsey said. “The impact of Marcellus drilling on state and local government costs is yet unclear, so it is too early to understand the overall impact of Marcellus on the state government. This state tax analysis does not indicate the impact of Marcellus development on local government and school district tax collections, since royalty and leasing income is exempt from the local earned income tax, and local jurisdictions cannot levy sales taxes.”
Kelsey said researchers wanted to find out if state tax records could yield objective financial data on how local economies are being affected by Marcellus Shale development.
“The state tax information provides a glimpse at how sales activity and personal income are changing,” he said. “The state collects objective tax collection information every year, and that can provide a good snapshot of how residents’ income is changing and the amount of retail activity going on.”
Kelsey explained that the booklet can help the average citizen to understand that Marcellus Shale development is having a discernible economic impact on residents and in communities.
“We’re early enough in the development of the shale that much of what we ‘know’ is based on anecdotes and personal stories,” he said. “This analysis provides some real numbers behind those anecdotes. The data show clearly that there are economic benefits that are accruing because of the gas activity — higher personal tax collections, higher sales tax collections. Realty tax incomes in drilling counties are decreasing, but less than in non-drilling counties.
“The booklet will not tell you how those benefits relate to costs, because we weren’t able to look at that,” he added. “So, it is only a partial picture of what’s going on. You know there are dollars coming in but you don’t know if it’s a net gain or a net loss to the community.”
Kelsey cited increased highway repair and maintenance, greater administrative demands, changing human service needs, and law enforcement and courts among the costs that determine whether the drilling activity is adding to or subtracting from a county’s bottom line.
Kelsey stressed that, because the study focuses only on state tax collection, it doesn’t support assumptions about local tax changes. He points out that local governments don’t have the option of a sales tax, and that the personal income tax increases seen in the study are largely the result of leasing and royalty income, which are both exempted from earned-income tax.
“So we know from this analysis that state revenues are going up, but we don’t know if local tax revenues are increasing or decreasing as a result of the activity,” he said. “That’s a huge caveat.”
Single copies of “State Tax Implications of Marcellus Shale” can be obtained free of charge by Pennsylvania residents through county Penn State Extension offices or by contacting the College of Agricultural Sciences Publications Distribution Center at 814-865-6713 or by email at AgPubsDist@psu.edu. For cost information on out-of-state or bulk orders, contact the Publications Distribution Center. The publication also is available on the Web at http://pubs.cas.psu.edu/FreePubs/pdfs/ua468.pdf. Click here: State Tax Implications of Marcellus Shale
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.”
Corbett refuses to budge on gas tax policy
Pennsylvania’s governor tells township supervisors he will protect the state’s water from dangers posed by drilling.
HERSHEY — Gov. Tom Corbett told a crowd of local-government officials Monday that he would oppose a new state tax on natural gas extraction even if the industry had not contributed nearly $1 million to his election campaign, and he vowed to protect the state’s water supplies from drilling-related degradation.
“I will not let them poison the water,” Corbett said, drawing applause from many of the more than 1,500 people who turned out to hear him speak at the annual conference of the Pennsylvania State Association of Township Supervisors.
Gas drilling on the Marcellus Shale formation that stretches beneath much of western and northern Pennsylvania is proliferating rapidly, and the response to the governor’s speech underscored the importance of drilling to the local officials who deal with its benefits and dangers on a daily basis.
Of particular concern is the drilling wastewater, some of which is taken to treatment plants that discharge into waterways that are used as sources of drinking water. Locally, the Wyoming Valley Sanitary Authority is considering conducting a feasibility study on constructing a plant to treat the water mixed with chemicals used in the hydraulic fracturing process to extract natural gas.
Earlier this month, the Corbett administration said it was widening the scope of water tests to screen for radioactive pollutants and other contaminants from drilling and adding more water-quality testing stations on the state’s rivers.
“We need to protect the water,” said the governor, a Republican, “but we must do it based on science, not emotion.”
Corbett has come under fire for proposing deep cuts in state aid to higher education and public schools in his state budget plan for the year that starts July 1, while refusing to tax the natural gas that multinational energy companies and others are extracting from shale deep underneath land leased from public and private owners.
The former state attorney general, who was sworn in as governor in January, said a new tax would be detrimental to job creation at this early stage of the state’s gas industry.
“Everywhere I go in the Marcellus region, we’re starting to see development,” he said. “It’s the only industry that’s really growing in Pennsylvania.”
Pennsylvania is the only major state that produces natural gas but does not tax it. But Corbett warned the township officials that state-to-state comparisons are tricky because each state has a different tax mix. He cited Texas, where he went to law school, as an example.
“Texas doesn’t have a personal income tax. Texas doesn’t have a property tax. So when we’re talking about taxes, don’t you think we ought to compare apples to apples and oranges to oranges?” he asked. Pennsylvania has a state income tax and local property taxes.
Corbett, who pledged in his campaign not to increase taxes or fees if elected, said the generous industry contributions he received were not a factor in his opposition to a tax.
“Had they not given me a dime, I would still be in this position, saying we need to grow jobs in Pennsylvania,” he said.
The governor said he remains open to a proposal that would allow counties or municipalities to impose local impact fees on drilling operations to help finance repairs to local roads damaged by heavy truck traffic and other consequences of the activity.
PETER JACKSON
April 19, 2011
http://www.timesleader.com/news/Corbett_refuses_to_budge_on_gas_tax_policy_04-18-2011.html
Pa Democratic budget plan includes drilling severance TAX
HARRISBURG – A state budget plan offered by Democratic senators last week includes a tax on Marcellus Shale gas production, but the caucus is proposing other actions to head off deep cuts in state aid for education, health care and social services.
Outnumbered 30-20 in the Senate, Democratic senators said it is important that they offer alternatives to the $27.3 billion state budget for fiscal 2011-12 unveiled last month by Republican Gov. Tom Corbett.
Mr. Corbett proposes to cut state aid to public schools and higher education by 50 percent, eliminate $35 million for the Human Services Development Fund, a conduit of state aid for county-run human services programs, and reduce some aid for hospitals. The governor wants to increase welfare spending by 7 percent.
The Democratic caucus plan would put together $1.1 billion in revenues to help balance the budget through cost-saving efforts and tax changes.
The senators say an estimated $750 million in savings can be achieved by finding alternatives to state prison for nonviolent offenders and weeding out ineligible individuals receiving welfare benefits.
Senators think the Liquor Control Board will be able to generate up to $100 million more from state store liquor sales if allowed more flexibility on pricing, hiring and purchasing practices.
They say nearly $300 million in revenue can be generated by extending a state tax on corporate stock values for another year, reversing new accelerated depreciation rules for businesses and collecting sales tax on Internet sales.
The senators would use this revenue to keep state aid to public schools and higher education at current levels and fund the human services development fund and homeowner mortgage-assistance programs. They want to tap the state tobacco settlement fund again to revive the adultBasic health coverage program for low-income adults.
“The (Corbett) cuts in education K-12 and higher education are much too severe,” said Sen. John Yudichak, D-14, Nanticoke.
Mr. Yudichak said the caucus wants a Marcellus Shale tax to be seriously considered during the budget floor debate later this spring.
He recently sponsored a severance bill to levy an initial rate of 2 percent on the gross value of gas production for the first three years of production, then hike the rate to 5 percent, reverting back to 2 percent after a well’s rate of production falls below set daily thresholds. But the Democratic caucus has yet to endorse a specific severance tax.
There is an emerging consensus among lawmakers that any Marcellus Shale revenue should not go to the state General Fund, but differences exist over which environmental or water-protection programs should be beneficiaries, said Mr. Yudichak, ranking Democrat on the Senate Environmental Resources and Energy Committee.
House and Senate Republican leaders are looking to restore proposed education cuts and make up the difference with cuts instead to public welfare programs.
The first budget bills out of the majority caucuses are expected early next month.
Mr. Corbett has reaffirmed his opposition to a severance tax and other state tax hikes in recent appearances. Senate GOP leaders are working on legislation to allow local governments to levy an impact fee on gas drillers to offset the municipal-related costs for roads and infrastructure repair.
Meanwhile, the Senate Democratic Policy Committee will hold a hearing Wednesday in Scranton on caucus proposals dealing with the budget and economic development. The hearing starts at 12:30 p.m. at the Nazareth Student Center at Marywood University. Sen. Lisa Boscola, D-18, Lower Saucon Twp., is chairwoman of that panel.
“This public hearing will be a great opportunity for legislators to not only discuss with our residents the pressing budget issues, but also a great opportunity for our community and business leaders to share their experience,” said Sen. John Blake, D-22, Archbald.
By Robert Swift (Harrisburg Bureau Chief)
Published: April 16, 2011
Contact the writer: rswift@timesshamrock.com
http://thetimes-tribune.com/news/democratic-budget-plan-includes-drilling-severance-tax-1.1133427#axzz1Jb4OFfes
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
Yudichak has high hopes for tax on gas extraction
The Luzerne County Democrat claims bipartisan support in the state Senate.
State Sen. John T. Yudichak
State Sen. John T. Yudichak, D-Plymouth Township, said Wednesday the natural gas severance tax he is proposing could generate more than $126 million in its first year and more than $406 million by 2016.
Yudichak announced the proposed tax on natural gas extraction at a press conference in Harrisburg on Wednesday, the day after he introduced the bill in the state Senate.
The estimated tax revenues are based on the number of gas wells currently in operation in the state and additional wells expected to be permitted in 2011, Yudichak said.
Revenue from the tax would be shared equally by three program areas:
• The Commonwealth Financing Authority for water supply, wastewater treatment, storm water and flood control projects;
• The Environmental Stewardship Fund (Growing Greener);
• Local governments in areas of Pennsylvania that experience direct effects of natural gas drilling.
“In areas where there is drilling activity, local governments are faced with a number of difficult issues,” Yudichak said. “Revenue from a severance tax will benefit those communities.”
Yudichak’s plan would impose a tax of 2 percent of the gross value of natural gas severed at the wellhead during the first three years of a well’s production, increasing to 5 percent after three years.
The tax rate would revert to 2 percent if a well’s rate of production fell below 150 million cubic feet of natural gas per day and to zero if it fell below 60 million cubic feet per day.
If implemented, the tax would take effect July 1.
A severance tax bill passed the state House last year under then Gov. Ed Rendell, a proponent of the tax on gas production, but the tax died in the Republican-controlled Senate. Gov. Tom Corbett opposes a severance tax.
Yudichak said his tax is different from last year’s effort both in its terms and in that it claims bipartisan support.
The bill is co-sponsored by Republican Sen. Edwin Erickson, R-Delaware County, and Yudichak said it has at least three Republican supporters.
“The fact that this bill has bipartisan support shows the need for this tax goes beyond partisan politics,” Erickson said Wednesday. “I believe this bill invests the tax revenues in a responsible way for the protection of our environment and the communities directly affected by the expanding natural gas industry.”
March 31, 2011
MATT HUGHES mhughes@timesleader.com
http://www.timesleader.com/news/Yudichak_has_high_hopes_for_tax_on_gas_extraction_03-31-2011.html