April 12, 2019
MERCER – A Mercer County commissioner and Pennsylvania business groups expressed their opposition Thursday to Gov. Tom Wolf’s proposed severance tax on natural gas drillers.
The proceeds form the tax would fund a $4.5 billion plan to restore critical infrastructure across the state.
During a conference call conducted Thursday by the Pennsylvania Chamber of Business and Industry, Commissioner Matt McConnell said Wolf’s plan, RestorePA, is particularly detrimental to the county. He said adding the tax would cause companies to operate in other areas.
“It is simple economics,” McConnell said. “There will be consequences.”
The commissioner said drillers already have a harder time accessing natural gas in Mercer County than other areas due to greater depths they have to go. He explained in an interview later that the Marcellus Shale is very thin here, so drillers have to go down to the Utica and Upper Devonian shale.
“It’s the depth of the formation,” McConnell said.
Under Wolf’s plan, revenue from the severance tax, which would be based on the volume of gas extracted and the variable rate of gas prices, would be used to make payments on $4.5 billion in bonds.
The governor maintains Pennsylvania should not be the only gas-producing state without such a tax. Drillers currently pay permitting and impact fees, but are not taxed on the product.
However, McConnell said the fees and proposed tax fall under the same umbrella.
“I do see the impact fee as a gas tax,” he said.
Among the needs Wolf wants to address are flood prevention, eliminating blight and expanding broadband throughout the state, particularly in rural areas.
During the conference call, McConnell said the fees already assessed to drillers fund a substantial amount of improvements, including bridge work and enhancements to recreation and parks.
Jezree Friend, government relations representative of the Erie-based Manufacturer & Business Association, said a severance tax would be bad for business.
“We find it to be counterproductive,” Friend said. “There is no such thing as a reasonable tax on business.”
He said discouraging drilling in Pennsylvania would have a negative economic impact on any growth that has occurred.
“These additional taxes will only stunt that growth,” Friend said.
He pointed out drilling generated $1.5 billion for the state this year, so drillers should not be further burdened.
“Pennsylvania should be doing what it can to roll out the red carpet,” Friend said.
He insisted it would be a mistake to not recognize the revenue and jobs created by drilling.
“The bottom line is drillers will look to go elsewhere for a more accommodating state,” Friend said.
Dan Weaver, president of the Pennsylvania Independent Oil & Gas Association (PIOGA), agreed drilling impact fee revenue has provided numerous benefits, large and small. He cited the example of Driftwood, a borough in Cameron County, which received $100,000 to upgrade its sewage system.
“It was invaluable to the people of Driftwood,” Weaver said.
He stressed the downside of state borrowing under Wolf’s plan with the $4.5 billion being stretched out to $8 billion in debt payments over 30 years.
Weaver also cited job growth from drilling as a reason not to discourage it through additional taxation.
“This is one more step on industry we cannot stand,” he said.
Stephanie Catarino Wissman, executive director of the Associated Petroleum Industries of Pennsylvania, agreed the state revenue from drilling is vital. She said that money now totals $1.7 billion since the impact fees were imposed under state Act 13 in 2012.