Business, civic group opposes natural gas tax

Business and civic leaders, some from Indiana County, offered a rebuttal Thursday to Gov. Tom Wolf’s plan to use what he calls “a commonsense severance tax” on natural gas to finance a $4.5 billion, 20-year “Restore Pennsylvania” bond issue.

“There is some merit to increased infrastructure spending,” said Kevin Sunday, director of government affairs for the Pennsylvania Chamber of Business and Industry, during a conference call with reporters on behalf of a group calling themselves “Citizens to Protect Pennsylvania Jobs.”

However, he went on, “tying the funding for that size of a bond obligation to a commodity resource through a tax that the Legislature has rejected for 10 straight years is going to hurt the state’s economy and industry.”

As posted on its website, Wolf’s administration said it wants “monetization of a commonsense severance tax that the Independent Fiscal Office has determined will be primarily paid for by out-of-state residents,” to “help communities across Pennsylvania prevent flooding, eliminate blight, expand broadband, and address other critical infrastructure needs.”

Sunday and other speakers said the proposed tax would have a negative impact on Pennsylvania’s economy and the state’s natural gas industry, at a time when “revenue collections are $800 million above estimates” in part because of reduced taxes and regulations out of Washington.

“What is the benefit of the continued targeting of (Pennsylvania’s) natural gas industry through a counterproductive, punitive and anti-consumer policy?” asked Stephanie Catarino Wissman, executive director of the American Petroleum Institute in Pennsylvania. “We should look to working with the Legislature and the administration on policies that build on Pennsylvania’s successes.”

Rayne Township Supervisor and Republican county commissioner candidate Mike Keith said the proposed severance tax prompted Halliburton to move operations from Homer City to Zanesville, Ohio.

“We saw in the Halliburton situation just how quickly a large national employer can make a move in this industry and, in fact, are willing to make a move when it suits their needs, as it apparently suited Halliburton’s needs,” said Bill Darr of the Indiana law firm of Barbor, Sottile & Darr P.C. “Several decades of presence here by Halliburton, gone in a matter of months. Several hundreds of jobs gone in a matter of months.”

Keith said Halliburton’s move and other actions, such as Falcon Drilling dropping “down to a skeleton crew” has had a domino effect on other businesses in Indiana County.

“It is something that we need to continue to oppose and try to get this industry built back up, not just in Indiana County but in the general area,” Keith said.

“We’ve seen prices in the natural gas industry go from $4 per MCF (thousand cubic feet) to $2.80 per MCF in the last couple of weeks,” said Dave Brocious, a partner in various companies including Sky Point Crane and a member of the Indiana County Chamber of Commerce board of directors. “While there is a need for infrastructure and investment, there is a better way to do it than pushing on the gas industry that has had its challenges.”

The speakers disputed the Wolf administration’s contention that Pennsylvania is the only gas-producing state that does not levy a severance tax on gas drillers.

“Personally, I do view, and really always have viewed, the impact fee as a severance tax, although it has been locally directed in part, to counties and municipalities, to assist the counties and the municipalities that are impacted by drilling and by related activities,” Darr said. “There were many road improvements, many safety improvements, to township roads across the county that were directly funded by impact fee proceeds.”

Darr recalled an Indiana Gazette story of a year ago about how $209.5 million was distributed from impact fees collected in 2017 from natural gas producers under state Act 13 of 2012, including $169,713.23 for Indiana County and shares for 38 municipalities, with Center Township getting the largest share, $36,940.05.

“Restore Pennsylvania” proposed a severance tax on top of the existing impact fee.

As state Secretary of Community and Economic Development Dennis Davin told state Senate and House Democratic policy committees earlier this month, “that impact fee is based on number of wells rather than volume of production. As technology has increased and we need fewer wells to extract the same volume of gas, we’re not seeing the returns on the impact fee that we may have been anticipating when the fee was originally introduced.”

Davin said the Independent Fiscal Office, an agency established by state acts in 2010 and 2016, to provide revenue projections for use in the state budget process, “has determined that the majority of the severance tax will be paid for by residents in other states that consume our natural gas” and “will have no effect on the impact fee.”

The conference call by business and civic spokespersons came as the Wolf administration and its supporters in Indiana County were planning a media event for Wednesday, tentatively in Blue Spruce Park, near Ernest.

According to a spokesman for the Pennsylvania Department of Community and Economic Development, the event would involve Sherri Collins, acting executive director of the governor’s Office of Broadband Initiatives.

Earlier, Indiana County Commissioner Sherene Hess said a conversation with Collins led to tentative plans for the governor to hold an event that day at the Kovalchick Convention and Athletic Complex, but the DCED spokesman said no such event had been scheduled with the governor.