Rendell Says Severance Tax Deal Is Dead

Gov. Rendell today declared the promised Marcellus Shale natural gas severance tax dea, blaming Senate and House Republicans.
Senate Republicans and House Democrats promised in law to pass both a natural gas severance tax and create an Independent Fiscal Office by October 1 as part of the budget settlement in July. It appears neither promise will be met.
On an October 19 conference call with key Democrats and Republicans from the House and Senate, Gov. Rendell asked for counterproposals to a compromise tax plan that he had outlined last week.
On October 20, the Republican majority in the Senate responded with a letter that did not make a new proposal, but instead restated their previously announced positions on the tax rate and on accommodating the demands of the drilling industry. The House Republican Caucus did not immediately respond to the Governor's request.
"It is irresponsible for Senate and House Republicans to refuse to compromise and simply turn their backs on these negotiations after days and weeks and months of work. They signed a pledge to the people of Pennsylvania to enact a tax that requires drilling companies to pay their fair share for removing our state's natural resources from the ground, and now they are walking away from that commitment," Gov. Rendell said.
"Their clear unwillingness to change their previous proposal or to resolve differences with the House Democrats and with my administration makes it obvious that they have killed the severance tax in this legislative session. It is a broken promise, as well as a misguided policy decision that will harm our environment, will leave our local governments without the financial wherewithal to deal with the impacts of drilling in their communities, and will increase the budget challenges that Pennsylvania will face in the years to come," he added.
Gov. Rendell originally proposed a severance tax in February of 5 percent of the value of the gas at the wellhead, plus 4.7 cents per thousand cubic feet. The House several weeks ago passed a bill containing a higher tax, and the Senate Republicans said they were willing to support only a rate of just 1.5 percent, along with numerous loopholes that would reduce taxes for drilling companies even further than that low mark.
On October 11, Gov. Rendell offered a new compromise proposal that would have called for a phased-in tax of 3 percent in the first year, 4 percent in the second, and 5 percent in the third. He personally met several times with legislative leaders and representatives of the drilling industry in developing that compromise.
Hearing no reaction to the new plan, and seeing no evidence that Senate Republicans planned to bring the House-passed bill up for debate, amendment or a vote, the Governor tried to restart the negotiations with the Oct. 19 conference call.
The Senate Republican leaders responded yesterday with a letter offering the same 1.5 percent rate, the same giveaways to the industry, and excuses about the legislative process to try to justify their own inaction.
The General Assembly has left the Capitol for its election recess, and Senate Republicans have announced that they will allow no votes during what remains of the legislative session after the Nov. 2 election.
"With little time left to enact the severance tax, the Senate and House Republicans' adamant refusal to advance a meaningful counter-proposal speaks volumes about their intentions. They clearly desire to put costs of natural gas drilling on the backs of Pennsylvania taxpayers, rather than on the large multinational oil and gas corporations who stand to reap enormous wealth from our state's resources," Gov. Rendell said.
House Republicans
Rep. Sam Smith (R-Jefferson), House Minority Leader wrote to Gov. Rendell saying, "As you know, the House Republicans were not a part of any agreement regarding tax legislation. Still, our members spent the summer working on the Marcellus Shale issue. Our Appropriations Committee and Policy Committee visited well sites and affected communities. Further, they visited State College where the public busses are fueled by clean natural gas. These visits, hearings and meetings led to our Caucus's proposal to harness the potential for the Marcellus Shale Play.
"While we have not seen all the details of the Senate Republican proposal, several members of our Caucus are supportive of the concept.
"From what we know and understand, the issues which should be dealt with are the environmental impact in the local areas; the community impact; and maximizing the economic potential in the state."
Marcellus Shale Industry
Marcellus Shale Coalition president and executive director Kathryn Klaber issued the following statement regarding the months of good-faith, broad-based discussions that the industry continues to participate in with the goal of reaching sound, legislative and regulatory solutions that will encourage economic growth and job creation, while helping to put the Commonwealth on a path towards a cleaner energy future:
"From the outset of these discussions, our industry has been working closely with elected leaders and key stakeholders in an effort to modernize the Commonwealth's legislative and regulatory framework. These commonsense and shared goals will help ensure that capital investment will continue to flow into Pennsylvania, which is critical to expand job opportunities during this period of high unemployment and economic uncertainty.
"Expanding the responsible development of the Marcellus Shale's abundant, clean-burning natural gas resources will also help put our region and the nation on a path toward a cleaner and more secure environmental future.
"As part of a well thought out and considerate comprehensive overhaul that includes legislative and regulatory modernizations, our industry maintains its support for a competitively structured severance tax that allows for capital recovery and reinvestment, comparable to other leading shale gas producing states, such as Arkansas, Texas and Louisiana.
"The leadership in the state senate deserves credit for their months of work in crafting a competitive, well-balanced package of reforms that would help ensure Pennsylvania remains a leader in responsible shale gas development.
"While our commitment to achieve these shared goals remains steadfast, we're regretful that there wasn't closure brought toward achieving these commonsense initiatives during this legislative session. We must get this historic opportunity right; we cannot afford not to."
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