Lame duck Pennsylvania Governor Ed Rendell (D) has placed a moratorium on new natural gas leases on state forests lands. Rendell had previously supported new natural gas leases, but he decided to impose the moratorium after the state legislature declined to implement a hefty new severance tax he wanted.
The Governor’s actions will not affect natural gas exploration and production on more than 700,000 acres previously leased.
Taking Ball, Going Home
A majority of lawmakers voiced their support for the new tax, but Rendell wanted a much higher tax rate than Republicans in the legislature would accept. After months of stalemate, he called a halt to negotiations and imposed his moratorium.
‘Real Losers Are the People’
Republicans pointed out that during the present recession, natural gas production is one of the few growth industries. Even without the tax, natural gas producers pay substantial lease fees and royalties for natural gas produced on public lands.
Researchers at Penn State University estimated the gas boom in Pennsylvania would boost the economy by $8 billion and provide 88,000 jobs in 2010. Unless producers are driven from the state by high taxes or onerous new regulations, the study estimated by 2015 natural gas production in Pennsylvania could account for 160,000 jobs and more than $14 billion in revenue. Without the tax, the Penn State research suggests revenues from natural gas production could add more than $1 billion dollars per year to state and local coffers by 2020.
“Clean, versatile natural gas is on the fast track in the United States for use in many industries, from transportation to expanded power generation,” said Gary L. Stone, vice-president of engineering at Five States Energy Capital. “Only those politicians like Gov. Rendell with either an infantile understanding of economic growth or an environmental lobbyist’s check in his pocket would stand in the way of further development.
“Onerous taxes stifle development, as do drilling bans,” Stone added. “The real losers are the people of Pennsylvania that would benefit from the jobs and economic growth associated with the drilling.”
Corbett Likely to Reverse It
The moratorium on new gas leases on public lands may be a very short-term impediment to new production. Republican governor-elect Tom Corbett opposed the severance tax proposed by Rendell, arguing production and investment in the industry might flee to other states. Corbett is likely to remove the moratorium upon taking office.
On his campaign Web site, Corbett said, “The commonwealth currently finds itself at a competitive advantage when compared to other states with similar gas shale plays. Capital investment to develop Pennsylvania’s Marcellus Shale is increasing rapidly, and . . . is expected to generate over $600 million in tax revenues to the Commonwealth during 2010 without a severance tax.”
“[A] punitive tax on the industry at this stage would reduce capital investment in the commonwealth and reduce the potential for new jobs, tax revenues and other economic benefits associated with development of the Marcellus Shale,” Corbett added.
H. Sterling Burnett, Ph.D., ([email protected]) is a senior fellow with the National Center for Policy Analysis.