Corbett Holds Ground Against Shale Gas Taxes

Published August 1, 2011

Pennsylvania Gov. Tom Corbett (R) is positioning the Keystone State to be a leader in 21st century energy production, vowing to veto any legislation imposing a fee on the production of natural gas from shale deposits. The Pennsylvania state legislature discussed but declined to pass a bill this year imposing a fee on shale gas production, and Corbett’s veto threat is intended to discourage the legislature from revisiting the issue during the 2012 session.

Competing Bills Debated
Democrats and several Republicans had indicated they would support imposing a new fee on shale gas production, but the two parties could not agree on the specifics of competing proposals. Corbett is warning Republicans, as well as Democrats, that he would veto any such fee.

House Democrats have been pushing for a drilling impact fee but were unsatisfied with the proposal GOP leaders were planning on offering, calling it “unfavorable.”
Rep. Dave Reed (R-Indiana) has sponsored legislation that would levy a fee on shale gas wells to the tune of $50,000 in the first year, $25,000 in the second and third years, and $10,000 a year for the next seven years.
Democratic caucus spokesperson Bill Patton called the proposed fee an overly generous giveaway to the oil and gas industry. Corbett, by contrast, says any fee on natural gas production will chase jobs out of state.

“We viewed [the Reed bill] as a slapdash effort by House Republicans to offer the illusion of action on Marcellus shale, but not the reality,” Patton said. “This impression was borne out the following day when Republicans decided not to bring up either the amendment or the bill to which it was offered.”
“The governor made it very clear he would veto any proposal passed before his commission’s report came out on July 22; so, it stood to reason to respect his wishes and attempt to find a reasonable conclusion on this issue with the Senate and the governor over the summer and into the fall,” said Rep. Reed.
Commission Calls for Moderation
Reed’s proposal wasn’t the only offer on the table. Democrats offered a bill that would require gas producers to pay 30 cents per 1,000 cubic feet of gas recovered, with an adjustment mechanism if gas prices rise more than 5 percent annually.

The Corbett commission’s 137 page report was published on July 22 and contains 96 recommendations, among them guidance for any fee that may be enacted, stating any fee should be done “in a manner that does not discourage maintaining or expanding partnerships between well operators and local communities.”

The Democratic caucus wants an impact fee, according to Patton.

“This state needs to join every other gas-producing state in the nation and tax the large corporations that are profiting handsomely by extracting this natural resource in such close proximity to consumer markets,” Patton said.

Activist Groups Would Benefit
The natural gas industry is already paying for its impacts, in addition to boosting local economies, explains Nathan Benefield, director of policy analysis at the Pennsylvania-based Commonwealth Foundation.

“Businesses should pay for the cost of government they use, but it isn’t clear that the natural gas industry isn’t already paying for its impacts,” Benefield said. “A lot of the debate is fueled by misinformation—that gas drillers aren’t subject to taxes at all, when in fact they contribute hundreds of millions in state and local taxes now—or by half-truths, like ‘every other state has a severance tax.'”

“Every state with a severance tax has a lower overall tax burden than Pennsylvania, and a lower corporate income tax rate—PA’s is second highest in the United States—if they have one at all,” Benefield explained.

“Much of the push for a tax or fee comes from environmental groups who support—and often get funding from—a program called ‘Growing Greener,’ which is set to run out of funding,” Benefield noted. “These groups want the tax or fee to help fund this, even though it has little to do with gas drilling.”

Alyssa Carducci ([email protected]) writes from Tampa, Florida.