Pennsylvania governor wants severance tax on natural gas

SOUTHPOINTE, Pa. — West Virginia legislators and lobbyists are vigorously debating raising the severance tax on oil and gas extraction.

Proponents argue that the gas developers make millions and can afford the pay their fair share to maintain the state’s infrastructure and support such things as PEIA. They don’t want a repeat of the old-time coal industry’s take-the-money-and-run behavior.

Opponents argue that neighboring Pennsylvania and Ohio have significantly lower taxes and industry wil simply pick up its rigs and take them across the borders; West Virginia already lags behind both in rig counts and production, despite an abundant supply of gas.

But the severance tax debate isn’t unique to West Virginia. In Pennsylvania, Democrat Gov. Tom Wolf is leading a severance tax-hike movement, termed his Restore Pennsylvania Program. His chief opponent is the Republican-led House of Representatives.

Gas industry leaders learned something about the struggle from Pennsylvania’s Republican Speaker of the House Mike Turzai during a session of the Appalachian Storage Hub Conference at Southpointe.

Pennsylvania has no severance tax now. It has an impact fee that’s generated more than $2 billion, Turzai said. “It has transformed southwestern Pennsylvania.” It’s helped counties grow that haven’t seen population or economic growth for decades.

The proposal passed the Senate once, he said, but died in the House. He doesn’t understand why Wolf is still pushing it. “Why are we talking about this ‘Restore PA.?’ I thought we had put this aside.”

Wolf has brought his plan back under HB 1585 [with some GOP support from the southeast part of the state] and SB 725, both introduced on Wednesday.

Wolf’s new “commonsense severance tax” would be volumetric and tiered according to sales price, ranging from 9.1 cents per unit to 15.7 cents,

The revenue would fund the issue of $4.5 billion worth of bonds to pay for various projects: broadband access, flood control, disaster response, storm water and transportation infrastructure, blight restoration and more.

Wolf promoted his plan in a press release: “We have a real opportunity to make impactful infrastructure investments in Pennsylvania. Restore Pennsylvania is the only plan presented that can actually address the needs in every community.

He continued, “We have an opportunity to provide all of our students’ internet access, an opportunity to help our municipalities truly address the crippling effects of blight, an opportunity to help families devastated by flooding when the federal government turns its back on them, and so much more. We need to seize this opportunity for all Pennsylvanians.”

Turzai thinks it’s a bad idea. “My notion is it is completely irresponsible.”

For one, it would depend on borrowed money, he said.

And it would be self-defeating because the businesses it taxes to pay the loans would lose incentive to do business in Pennsylvania – an argument similar to the anti-tax-hike arguments in West Virginia.

Also, while he believes in public-private partnerships, he said, he doesn’t see a point in using borrowed money to subsidize broadband providers such as AT&T and Verizon to do what they could afford to do on their own.

Countering Wolf, Turzai had his own Energize PA initiative, consisting of eight bills. They include a tax credit to attract manufacturers using methane to power production; creating 20 Keystone Energy Enhancement Zones where businesses will be eligible for state and local tax exemptions and credits for 10 years; expanding the state’s gas-fuel pipeline program to make low-cost gas energy available to residents, manufacturers and pad-ready industry and business sites; and streamline permitting for brownfield cleanup and environmental permits.

On that last point, Energize PA proposes to put the state Department of Environmental Protection’s permitting process under a separate independent commission. DEP would retain its enforcement powers.

“We think that would actually put law enforcement where it should be,” he said. The new commission would consist of gubernatorial appointees approved by the Senate.



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