Gene Yaw opposes proposed severance tax on Marcellus Shale drillers

State Senator Gene Yaw recently became the latest Pennsylvania lawmaker to join Speaker of the House Mike Turzai’s opposition to Gov. Tom Wolf’s proposed 5 percent severance tax on Marcellus Shale drillers.

Turzai told the Pennsylvania Business Daily last week that the measure was a “job killer.”

“I do not support Gov. Wolf’s proposed severance tax,” Yaw said in an interview with the Pennsylvania Business Daily. “The tax is based on average production and production is currently down so it makes no sense to tax it at this point.”

Wolf estimates the tax would produce $1 billion in revenues, but Yaw argues that is not going to happen, based on current production.

“The tax would have to be 20 percent [based on current production levels] to produce a billion dollars,” Yaw said.

Yaw represents five counties, four of them in the Marcellus Shale region.

“My district produces 58 percent of the gas produced in Pennsylvania,” Yaw said. “If you add Tioga and Wyoming counties, our area produces 70 percent of the total gas in the commonwealth.”

Yaw said the economic impact of the shale region has been extremely positive.

Act 13, the act that generates the commonwealth’s impact fees, has produced $850 million over the past four years, of which Yaw’s district received 20 percent.

“Act 13 has done more for rural Pennsylvania than any law that’s been enacted in the last 75 years,” Yaw said.

Yaw said he favors the impact fee over Wolf’s proposed 5 percent tax because impact fees are based on a formula, not a political process.

“The impact fees are distributed to municipalities as checks; they don’t have to apply for anything,” he said. “Those municipalities get to decide how to spend that money.”

And spend they have, Yaw said.

“They’ve built roads, lowered county taxes to leverage money for housing projects [and] the fees assisted in building a new YMCA,” he said.

Yaw said he fears if the tax passes, his district will lose income generated from the impact fees. By law, if a tax is enacted it would negate the impact fees. While Wolf has said he’ll “guarantee” to redistribute the fees back those who were receiving impact fees, Yaw is not so confident.

“The governor has said he’ll guarantee the impact fees back based on 2014 production, but production is down and I’m not willing to bet it will go back up,” Yaw said.

Wolf has proposed taking the money from the gas tax and investing it in the school system, but Yaw said that would negatively impact the schools in his district.

“He’s proposed an entire package of taxes,” he said. “I have 24 school districts in my district; 17 of them would be negatively impacted. It would be a severe blow.”

Yaw said one of his biggest fears is the tax would run the drillers out of the commonwealth.

“Corporations care about the biggest returns,” he said. “Wherever they drill is based on economics. The tax issue here is a serious concern. It affects stock prices. I think the simple question is does ‘Pennsylvania really want the drillers here?’ ”

Publication: Keystone Business News