Rep. Harper Proposes Severance Tax To Help Fund Public School Pension Costs

Rep. Kate Harper (R-Montgomery) announced Thursday she is introducing legislation to place a severance tax on natural gas drilling in the Commonwealth.

The tax rate would be competitive with nearby shale drilling states, and the revenue it generates would be directed to public school employee pension costs. The Public School Employees’ Retirement System currently has an unfunded liability that exceeds $32 billion.

“As this industry continues to grow, we have an opportunity to generate much-needed revenue to meet the ongoing economic challenges facing our state,” Rep. Harper said. “My proposal strikes the appropriate balance between keeping this job-creating industry competitive and capitalizing on the opportunity to protect our school taxpayers from skyrocketing pension costs.”

The tax would be in addition to impact fees assessed on drilling under Act 13 of 2012. Those fees are used to address infrastructure and other impacts in communities where drilling takes place, and to contribute to several statewide environmental programs. So far, the impact fee has generated more than $630 million.

“The impact fee has been very effective in meeting the needs of drilling communities and the Commonwealth’s environment overall, and my plan would not change one thing about the collection or distribution of these funds,” Rep. Harper said.

Rep. Harper’s proposal would assess a tax of 3.5 percent of the gross value of units severed at the wellhead. It is estimated the tax would generate more than $400 million annually

Rep. Harper is currently seeking co-sponsors for the measure and will formally introduce it in early January.