Reactions to Wolf’s severance tax proposal

Well, he did it.

Gov. Tom Wolf came out with an extraction tax proposal on natural gas. He tied the 5 percent severance tax, plus a fee of 4.7 cents per thousand cubic feet, to education funding. It mirrors a tax levied in neighboring West Virginia.

The new revenue could reach $1 billion by fiscal 2016-2017, Wolf said. Some have said his estimates are high.  Backers of the tax point to a Mercyhurst University poll last month that shows 61 percent of Pennsylvania voters support an extraction tax.

Here’s a sampling of reactions.

America’s Natural Gas Alliance Executive Vice President of Government Affairs Frank Macchiarola:

“… In 2013, Pennsylvania producers contributed $226 million in impact fees, which benefited the schools, parks, hospitals and critical infrastructure projects all across the state. Also, thanks to the abundance of Pennsylvania natural gas, public elementary and secondary school districts saved approximately 8.3 percent on electricity and 22.1 percent on natural gas during the 2012-2013 fiscal year, for a total of $45.5 million.

“Now is not the time to put this progress at risk by singling out natural gas producers and imposing a burdensome tax that could hamper future production. In fact, there is a great opportunity to boost economic development in the state by supporting critical infrastructure projects that will carry the Marcellus gas to nearby markets.”

Marcellus Shale Coalition President David Spigelmyer:

“Governor Wolf fails to acknowledge that the natural gas industry already pays significant taxes in Pennsylvania. Natural gas operators pay the same taxes that every other business in Pennsylvania pays, which has helped generate more than $2.1 billion through 2013. Pennsylvania is the only state that imposes a special impact tax that will have generated nearly $830 million by April of this year… Pennsylvanians have realized more than $700 million in royalties from energy-development on public lands…

“While we look forward to evaluating the policy details outlined by the governor today, it’s clear that new energy taxes will discourage capital investment into the commonwealth and make Pennsylvania less competitive. Make no mistake, adding a five percent tax to any business sector — including the energy industry — is going to reduce capital spending and hit the supply chain, especially Pennsylvania-based small and mid-sized businesses, as well as our region’s labor and building trades.”

Consumer Energy Alliance — Mid-Atlantic Executive Director Mike Butler:

“… (T)he cost of energy production in the state could increase substantially if such a tax were applied, causing a ripple effect that is felt throughout the Pennsylvania economy — leading to fewer manufacturing jobs, and negatively impacting everyone from small business and labor. Ultimately the increased cost of energy production via either aggressive taxes or reduced production will be felt by every household in the Keystone State.”

“Pennsylvania is fortunate to sit atop the Marcellus Shale. In the midst of what is now clearly the U.S. Energy Revolution, there is no doubt that production has helped the state create jobs and helped the nation stay out of a prolonged economic recession. More natural-gas production means lower energy costs and a growing Pennsylvania economy. Natural gas also helps reduce overall emissions….”

And just because I don’t want you to think no one out there supports Wolf, here’s Michael Wood, research director of the Pennsylvania Budget and Policy Center:

“Enacting a severance tax on the extraction of natural gas in Pennsylvania is long overdue. We, therefore, applaud Gov. Wolf’s proposal earlier today to establish such a tax at the same rate as neighboring West Virginia’s tax.

“Pennsylvania is now the second-largest producer of natural gas in the United States, and it is high time we taxed the value of this non-renewable resource as do other states. Research shows that severance taxes have little to no impact on oil and gas production. Drilling decisions are driven primarily by expectations about prices. With or without the tax, Pennsylvania’s Marcellus Shale is one of the most cost-effective places to produce natural gas in the United States.

“Moreover, as the conservative Tax Foundation has observed, natural gas taxes are often paid by out-of-state consumers. Pennsylvania consumers pay severance taxes imposed by other states but have failed to collect revenue when our Marcellus Shale gas is exported….”

(It should be noted that PBPC’s executive director, Sharon Ward, was named director of Wolf’s budget office last week.)

So, speak up, dear readers. What do you think? Is the severance tax a good or bad idea?

Joseph Deinlein

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