The Tribune Democrat, Johnstown, PA

Local News

December 14, 2010

Taxing debate: Should drillers be charged a fee?

— Pennsylvania is one of nearly 20 states with natural gas reserves, yet it is the only state without some type of severance or usage tax on drilling companies.

The issue was hotly debated two months ago, when a tax bill hit the state House. Industry leaders and some Republicans said the plan would stifle economic growth.

Outgoing Gov. Ed Rendell supported a severance tax, but no compromises could be reached and time ran out, said state Sen., John Wozniak, D-Westmont.

Now, what lies ahead for 2011 is uncertainty.

“I was hoping something would be drafted this year,” Wozniak said.

“But the House was asking for way too much, and the Senate and governor couldn’t reach a compromise.”

Gov.-elect Tom Corbett was not available to comment for this report, but indications are that he is sticking to his opposition to a Marcellus Shale severance tax.

The Pennsylvania Budget and Policy Center says a tax on gas drilling would generate millions of dollars that could repair roads, help meet a growing demand on social services because of the industry and meet a multitude of other needs.

State Sen. Richard Kasunic, D-Dunbar, supports a severance tax if most of the revenue would go the local municipalities impacted by the drilling, he said through his chief of staff, Will Dando.

“It should not go back into the (state’s) general fund,” Dando said.

Any money that does not go to impacted communities should be set aside for environmental problems, Dando said.

“Fifty years down the road, we don’t know,” Dando said.

Both the County Commissioners Association of Pennsylvania and the Pennsylvania State Association of Township Supervisors support a severance tax or usage fee of some type.

 David Sanko, PSATS executive director, said the financial burden that counties and municipalities will have to shoulder for years to come because of Marcellus Shale drilling would be very high.

“We’re concerned about the long-term maintenance of these roads,” he said.

“Without an impact fee, municipalities will have to increase taxes.”

Whether through a tax or impact fee, Sanko said the townships must be given a significant percentage of any money generated from Marcellus drilling.

He is calling for townships to receive not less than 30 percent of any tax collected.

“I think at the end of the day, the severance is not a tax on Pennsylvanians, it’s a tax for Pennsylvanians,” he said.

The drilling and economic bump brings with it increased demand not only on highways, but also on local fire companies, ambulance associations and police services, he said.

Doug Hill, executive director of the commissioners association, said counties with Marcellus Shale are seeing higher demand for services, resulting in higher operational costs.

“We support a severance tax conditioned on there being

a robust local share,” Hill said.

Waiting in the wings are the drilling companies, who are eager to see if they will pay, how much they must pay and when, said Lou D’Amico, executive director of the Pennsylvania Oil and Gas Association.

“We do favor some mechanicism, some way to get money back to the areas that are being impacted,” D’Amico said.

“We don’t want to inconvenience the folks living in the areas of the drilling more than we have to. We want to be good neighbors.”

The Marcellus Shale Coalition, representing drillers and related companies, blasted the September House severance tax, saying it was a vote against job creation and responsible development of natural gas.

Kathryn Klaber, coalition president and executive director, urged a competitively structured tax in Pennsylvania.

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