Rendell Sets His Priorities For Using Natural Gas Production Severance Tax

A series of accidents and environmental concerns illustrate the challenges the natural gas industry poses to the state and the reason why drilling companies need to pay their fair share to address them, Gov. Rendell said today as he visited southwestern Pennsylvania.
During a stop in Washington County—the most active county for drilling in the region—the Governor spoke to local elected officials, sportsmen’s groups, emergency responders, business leaders and environmental groups.
“Travel virtually anywhere throughout southwestern Pennsylvania and you’ll see that there’s been a phenomenal resurgence in drilling activities as big oil and gas companies seek to extract the trillions and trillions of cubic feet of natural gas that is a mile beneath our feet in the Marcellus Shale,” said Gov. Rendell. “There’s no doubt that this activity and this industry is creating new economic opportunities for our state, but it also creates a lot of new challenges for the host communities and poses a threat to our environment.
“The public recognizes this, and that’s why eight out of 10 Pennsylvanians recently polled said that they favor a tax on gas companies to fund programs that will protect our environment and help local governments handled increased demands on their services,” Gov. Rendell added, noting that 413 permits have been issued and 244 wells have been drilled in Washington County as part of the Marcellus “play” since the beginning of 2009.
The drilling activity has also resulted in dangerous incidents that have required action by local emergency responders. He pointed to a hydraulic fracturing (“fracking”) wastewater pond that ignited in the spring of 2010 in the county’s Hopewell Township. The resulting cloud of black smoke could be seen for miles.
The Governor also cited the June 2010 well blowout in Clearfield County, which sent natural gas and fracking fluid into the air for 16 hours before the well could be brought back under control.
“In each of these instances, local emergency responders such as firefighters, police officers, medics and hazmat crews were called to manage the emergencies until gas company experts could further address the situations,” said the Governor. “That created considerable costs to the municipalities and taxpayers that support those crews. It underscores the reason we need a robust severance tax—so the communities where drilling is taking place get the financial help they need to tackle these problems.”
He also said a similar share should go to environmental programs and organizations such as county conservation districts and the Fish and Boat Commission. The Governor was joined by John Arway, the commission’s executive director, and Commissioner Tom Shetterly.
“These gentlemen made the trip here today because they know what is at stake, and want to make sure our streams and gamelands are protected for today’s sportsmen, sportswomen, and for our sons and daughters,” said Gov. Rendell.
Gov. Rendell also said on August 18 $70 million from the severance tax was needed to fill a $280 million hole in the state budget this year caused by a decrease in federal funding for Medicaid.
Earlier this year, Gov. Rendell proposed implementing a severance tax on natural gas extraction that would be modeled after West Virginia’s levy — straight 5-percent on sales, plus an additional 4.7 cents for each thousand cubic feet of gas produced.
As part of the state budget deal reached in July, the General Assembly agreed to enact a severance tax by October 1.
“Pennsylvania quickly becoming one of the top 10 states for natural gas production in the country—up from 15th just a few years ago—but is the only major fossil fuel producer that does not levy a tax on natural gas extraction,” Gov. Rendell told the crowd. “That’s just not fair. With your help, we are going to change that.”
To date this year, 1,885 natural gas wells have been drilled in Pennsylvania. Of that total, 897 have been drilled to access gas deposits in the Marcellus Shale.
The Department of Environmental Protection has also issued nearly 4,549 drilling permits this year, of which 1,976 were for Marcellus development. The department is on track to issue approximately 2,700 Marcellus permits this year — a 36-percent increase over permits issued in 2009.