George: HB1489 Protects Taxpayers, Environment in Gas-Drilling Boom

HARRISBURG – State Rep. Camille “Bud” George, chair of the House Environmental Resources and Energy Committee, said legislation that would give Pennsylvania a fair return on the extraction of its natural gas deposits will get its first legislative test tomorrow.

HB 1489, the Natural Resource Severance Tax Act, was scheduled for a vote before the House Environmental Resources and Energy Committee at 9 a.m. Tuesday in Majority Caucus Room 140 of the Main Capitol.

“House Bill 1489 provides Pennsylvania taxpayers a reasonable return for the natural gas being removed by drillers,” said George, D-74 of Houtzdale. “Pennsylvania has a responsibility to its taxpayers, and not seeking a fair return for the natural resources and infrastructure owned by the people of Pennsylvania would be the zenith of irresponsibility.”

George said HB 1489 would resemble the extraction tax West Virginia implemented in 1987 by levying a 5 percent tax on the gross value of gas extracted and 4.7-cents for every thousand cubic feet of gas produced.

“The governor of West Virginia said its severance tax has had no repercussions on drilling or employment, as have studies on some of the severance taxes utilized by 27 other states,” George said. “The claims that a severance tax would stifle a growing industry in Pennsylvania’s Marcellus Shale Deposit are not supported by history, facts or common sense.”

George said the tax would not apply to wells producing 60,000 standard cubic feet a day or less.

“This exemption will protect the many smaller gas wells in Pennsylvania,” George said. “Even without this deserved exemption, the severance tax was projected to produce only $107 million in state revenues during its first year, which is hardly an onerous levy.”

The $107 million first-year revenue projection is less than the $112.5 million in compensation received last year by the CEO of a gas company that already has 17 wells drilled in Pennsylvania and is planning 89 wells.

“The CEO of one gas-drilling company could pay the entire severance tax for the entire industry for the entire first year and still have more than $5 million left over,” said George, noting that a company official said it gladly pays a severance tax in every state where it’s active, “except New York and Pennsylvania.”

The severance tax would generate roughly $600 million annually for state coffers by 2013-14. 

George said gas industry complaints about the prospects of paying a severance tax on top of a Corporate Net Income Tax and the Capital Stock and Franchise Tax are disingenuous.

“Gas drillers pay corporate and severance taxes in almost every gas-producing state,” George said. “The Stock and Franchise Tax is being phased out, and natural gas producers are exempt from property taxes.”

George said almost 73 percent of all registered corporations in Pennsylvania pay nothing in state income taxes, and most of the gas drillers operating in Pennsylvania are registered as Limited Liability Companies, subject to the 3.07 percent personal income tax but not the corporate income tax.

“The working Joes and Joans of Pennsylvania would love to have the tax setup enjoyed by producers,” George said. “However, it is an arrangement lacking in fairness and responsibility.”

An amendment to be offered at the committee meeting will detail how severance tax proceeds would benefit Pennsylvania. George said the amendment would include dedicated funding to help local governments address infrastructure costs, funding to address environmental impacts as well as General Fund contributions.

“Arguments against a severance tax by gas industry lobbyists have been refuted at every turn of the road,” George said. “Seldom in state government does such a clear litmus test present itself – either lawmakers make a stand for taxpayers and the Commonwealth or they stand for a multi-million-dollar give-away to an industry that will reap outstanding profits from Pennsylvania resources for many, many decades.”

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