LTE: New Shale Gas Tax Proposal

Dear Editor:

A proposal by Pennsylvania legislators to enact a new tax on shale gas drilling could hurt both local governments, as well as the state’s economy. Concerned citizens should contact their legislators to derail this misguided tax.

Act 13, a 2012 law, established the per-well fee paid by energy companies, and has pumped millions of dollars into the tri-county area. Act 13 also contains a provision that ends the fee if the state enacts a severance tax.

According to Washington County Commissioner Larry Maggi, “They see a golden goose and want to strangle it.” Local government officials are especially worried about this tax plan.

According to the Tribune-Review, “A push in Harrisburg to enact a tax on companies pulling natural gas and oil from Pennsylvania shale has some community leaders worried about losing the pipeline of impact fee money flowing to townships and counties.”

Another commissioner, William L. McCarrier, of Butler County, shares this concern. He says,” I don’t want to tax something to the point that we drive it out.”

As McCarrier points out, not only could this tax proposal reduce the amount of revenue going to local governments, it could also kill jobs in Pennsylvania. Make no mistake, these short-sighted tax schemes are based on politics, not economics.

Gene Barr, president of the Pennsylvania Chamber of Business and Industry, agrees. He notes that a higher tax could make it unprofitable for natural gas companies to operate in the state. Barr states, “The reality is it can stay in the ground if it’s not economical to get out.”

This tax plan is a big threat to shale gas production in Pennsylvania. That’s something that should concern everyone in Clearfield County.

John Balliet

DuBois

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10 thoughts on “LTE: New Shale Gas Tax Proposal

  1. jls16845

    You don’t want Corporations to pay taxes here in PA Well I stock Shelves here at Wal-mart in Clearfield Let me pay it I like…. a lot of people in Clearfield make tons of money I’ve got money I’ve never spent yet! State needs more Tax dollars and don’t want to get it from Corporations No problem Here let me pay it Tax gas $5.00 more dollars gal we’ll pay it We have to To get to our $7.25 hr jobs. Lets kiss the corporations butt some more. Lets get like NY 10 yrs no taxes Free ride for company’s because we can stick it up your employees butts make them pay for your free ride. What a joke!

  2. Tax Paying Member

    Severance Tax Myths vs. Facts
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    40557601 – The Law Offices of Cara C. Davis Campaign

    Severance Tax Myths vs. Facts

    news293Groups and officials calling for the imposition of a severance tax on natural gas continue to make claims about the industry and the taxes it pays that are simply untrue, or that ignore broader tax realities that would make a Pennsylvania’s tax structure for energy development uncompetitive against other oil and gas producing states.

    Here are a few of the myths and the realities:

    The natural gas industry doesn’t pay taxes.

    It is estimated that the natural gas industry has paid approximately $2.1 billion in taxes to state and local government since 2008, the first year of significant Marcellus Shale drilling.
    The industry pays Pennsylvania’s 9.99 percent Corporate Net Income tax, just like every other business in the commonwealth
    The industry pays sales taxes on equipment used in all aspects of drilling wells and installing pipelines.
    The industry has paid more than $625 million in impact fees to counties and municipalities across the state in the past three years.
    The industry needs to pay for the damages they are causing to infrastructure.

    The state’s natural gas impact fee mandates that 60 percent of the total funding raised each year be allocated to counties and municipalities where drilling activity is taking place – that’s $375 million in just three years.
    The industry has spent an additional $600 million for road repair and maintenance in areas where drilling is taking place, often upgrading roads before any drilling activity begins.
    The industry pays motor fuel taxes on every gallon of diesel fuel used in trucks that use state roads and highways, as well as taxes on some fuel used at drilling locations.
    The industry is taking a resource that belongs to the commonwealth without compensation.

    In addition to all of the taxes being realized by the commonwealth, the state has also received over $600 million in lease and royalty payments for drilling activity on state-owned land; that amount will continue to grow as additional wells are drilled and more natural gas is produced.
    Natural gas beneath an individual’s property is a resource that is owned by the mineral rights holder, not by the Commonwealth of Pennsylvania. The commonwealth is compensated for every cubic foot of natural gas extracted beneath state property.
    Pennsylvania, Ohio and West Virginia should all have the same form of severance tax to make a level playing field for shale in this region.

    A three-state “equal” severance tax will greatly reduce Pennsylvania’s competiveness with Ohio and West Virginia, considering Pennsylvania’s corporate tax rate of 9.99 percent vs. West Virginia’s 6.5 percent.
    West Virginia maintains an important exemption from sales tax for every aspect of developing a natural gas well, compared to a far more limited treatment of those expenses in Pennsylvania. Those exemptions increase the overall cost of drilling a single well in Pennsylvania by approximately $120,000.
    Pennsylvania is the only natural gas-producing state without a severance tax.

    While that stand-alone statement is true, a detailed review of tax realities tell a far different story.
    Developing and comparing “equal” state tax burdens is not an easy task, given the complexity of each state’s tax structure. As a general snapshot, Pennsylvania is tied with four other states as having the ninth highest tax-burden state in the country, at 10.2 percent of total income.
    Pennsylvania’s natural gas industry pays the highest corporate income tax in the nation at 9.9 percent; Texas, by comparison has a corporate tax rate of zero, along with a personal income tax rate of zero.
    Pennsylvania’s corporate tax rate is also more than double that of Colorado, North Dakota and Ohio, three states with significant shale drilling.
    Limiting a severance tax to natural gas, while ignoring other extractive industries in Pennsylvania, would run completely counter to fair tax policy. Any discussion of a severance tax should recognize its applicability to similar industries, including coal, gravel, slate and timber.

  3. Tax Paying Member

    Tax and Spend, over and over again and again. We as a State and Country have a SPENDING PROBLEM. We need to control spending. The Children are touted as the reasoning for more educational spending. We have thrown money at the educational system for decades with no improvement.

    This TAX SCHEME just takes in more money and allows more spending. Wake up, businesses need to make a profit. Adding more taxes will accomplish one of two things. Either the business will cease to operate because of increased expenses and not being able to compete in the marketplace, OR the tax will be passed along to YOU and I who consume the product. We the People PAY ALL TAXES, irregardless of who the tax is levied upon. STOP THE SPEND, SPEND, SPEND CYCLE, make PA a better place for business to come and employ our people. Then the added Jobs would create added economic growth and added income to both our people and our State.

    • boptherabbit

      I have to agree with you on the tax and spend problem. We waste so much tax money on pork barrel projects that there is no money left for the things we need like educating our children and repairing our failing infrastructure. Look at the billions and billions we are wasting on our military. Spending money on things they don’t even want or need, all to keep people in this district or that district working. We are spending billions to send our youth to die fighting wars in countries that turn around and spit in our faces when it’s all said and done. We also line the pockets of the rich by giving them a pass on taxes that the average American has to pay. We are taxing the hell out of the companies that are talking the coal out of the ground, the companies that haul the coal, etc., but we’re giving the gas and oil companies a free pass to take our resources which they, in turn, sell to foreign countries. The only thing we see out of it is ruined drinking water and ugly wells. So, yes, tax the companies removing the gas and oil. But start using a little common sense when you spend the tax money.

      • Tax Paying Member

        The State is already receiving a TAX ( severance fee – call it what you will ). Part of those funds are legislated to return to the municipalities where the assets are being removed from. Thus if your municipality chooses not to participate in gas extraction, you will get substantially less of those funds, as it should be. If the state enacts the “New Shale Gas Tax”, those funds are scheduled to dry up. The NEW TAX will go to the State’s coffers. The State will then budget the funds to its bloated TAX and SPEND POLICIES. The municipalities that have received these ( supposed windfall ) severance fees all say they are glad to have some monies boosting local budgets. Local budgets, where local people can and do have greater control of how the monies are spent.

        Everyone always wants MORE, MORE, MORE. It has to stop somewhere. Control the spending, don’t fund more spending.

          • Tax Paying Member

            Let me be perfectly clear on the Title of the Tax / Fee PA is currently receiving. It is called an IMPACT FEE and is explained here by, Patrick Henderson, Corbett’s energy executive. Pennsylvania went with a unique impact fee to balance a good tax climate for business with “making sure natural gas operators pay their fair share.” He noted that other states such as Texas charge companies a fraction of the corporate net income tax that Pennsylvania has.

            Pennsylvania collects fees on wells that are not producing gas, he said. States with severance or extraction taxes make money only when gas is coming out of the ground.

            I just wanted to clarify the nomenclature, but it is still a TAX / FEE on the Gas Industry.

    • Provoking

      I believe the current impact fee is collected by the PUC, and roughly 60% goes back to the counties and is distributed by a formula and roughly 40% goes to the commonwealth. Everyone is making bank on it. The biggest issue here would be that counties that have the impact of the work being performed get the majority of the revenue, but 40% going to the state is still fairly substantial.

      On the other hand, if the severance tax is implemented it negates the impact fee and all the money goes to the state and we have to hope we see some of the funds. Townships and boroughs currently getting the money are going to lose that earmarked revenue which is many cases has been a godsend.

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