Saturday, July 29, 2017

PA Senate GOP Leaders Stab Gas Industry With Severance Tax Plan

The following article was published in the Marcellus Drilling News and distributed Saturday morning via Twitter by Drew Crompton, Chief Of Staff for Senate President Pro Tempore Joe Scarnati (R-Jefferson)--
Pennsylvania Senate Majority Leader Jake Corman and Senate President Pro Tempore Joe Scarnati have betrayed the Marcellus gas industry and should be tossed out on their rear-ends in the next election.
“Corman, Scarnati and other so-called Republicans in the PA Senate leadership have signed on to promote a severance tax plan to “close” the budget gap THEY CREATED by idiotically passing a bloated spending plan they couldn’t pay for.
“Now, caving to pressure from a tax-and-spend liberal media and tax-and-spend Democrat Party, PA Senate Republicans have opened a door that should never have been opened.
“PA’s Marcellus drillers already pay the equivalent of a 9.16 percent severance tax–highest in the country (called an impact fee).
“This new plan leaves the impact fee in place, AND places a severance tax on top of it, guaranteeing LESS drilling (and less tax money) for PA, not more.
“How utterly stupid is that?
“Last night 19 members of the PA Senate Appropriations Committee voted on a plan that, among other things, puts a 2 cents per thousand cubic feet severance tax on all natural gas produced, which, according to the wizards of smart in the Senate, will raise an extra $108 million.
“Today the package goes to the full Senate for a vote, where it is expected to pass. It then goes to the House.
“If a severance tax is passed (big if), Gov. Wolf can finally “check a box on a campaign promise” to give away other people’s money to teacher’s unions.
“Our only line of defense now is the steel backbone of PA House Speaker Mike Turzai and the House Republicans, to hold the line and reject the severance tax proposal coming from the Senate…"
In response, Crompton’s Tweet said, “We knew this would be whispered. I didn’t think it would be printed.  All the shale provisions are nonseverable.”
Nonseverable means if one provision of the Tax Code bill is declared unconstitutional, then the severance tax and the whole set of Tax Code amendments passed by the Senate related to DEP permitting "reforms" will become null and void.
That’s why the most onerous provisions related to DEP’s permit programs were put in the Tax Code bill in the first place-- as a trade off.
Click Here for an image of the article.  Click Here for an image of Crompton’s Tweet.
The Rest Of The Article Says...
If you subscribe to the Marcellus Shale News, this is what a key part of the remainder of the article says--
“We sincerely hope and trust the drilling industry will put big money behind challengers to Corman, Scarnati and the other traitors in the PA Senate. In fact, we have the list of names from the Republicans on the budget committee who voted “yes” to a severance tax, so you know who to vote (and contribute) against next time around.”
The article goes on to list the Republican “traitors” and the “four brave Republicans who voted against this insanity, worthy of your support in the next election” -- Senators Argall, Langerholc, Martin and Wagner.
Click Here for an image of the article not included in the free view and from which this quote was taken.
(Photo: Illustration from the article in Marcellus Shale News.)


  1. Sorry, but your 19% impact fee is fake news. It's actually closer to a shamefully low 2%. Either you have just made up a number or the price of gas you are using to calculate the total market value of gas is dishonesty low. Unconventional production in 2016 was 5.095 billion. Regional price of gas per the IFO in 2016 was $1.53. which means the value of gas was 7.8 billion. Impact fees paid were $173 million. That's an effective tax rate of 2.2%. IFOs 2017 Impact Fee Outlook, is more generous and makes post production cost deductions from the price to arrive at 0.75 per unit. Even with making this price deduction, they arrive at an impact fee effective rate of 4.5%. yet you are at 19.6%. keep in mind the impact fee Act 13 requires the use of the NYMEX spot price of gas with no deductions to determine impact fee rate schedule, which is considerably higher than the two prices used above. The new severance tax uses NYMEX for tax rate determination as well. If you use that price with estimated production ranging from 5.2 to 5.4 billion over 2017 and 2018, the combined effective rate of estimated impact fee and tax collections is right around 2%. Let me repeat that. The combined rate of the impact fee and severance tax over the next two years is roughly 2%, even with rosie impact fee collections.

  2. Regarding natural gas severance tax. This is truly bipartisan. Exporting natural gas around the world, the U.S. currently enjoys a competitive advantage of $3 to $15/Mcf compared to all other countries. This would easily allow all producer states to apply a 33% severance tax to the current approximate $3/Mcf U.S. price of gas for the U.S. to remain extremely competitive world wide. ALL producer states should jump on this to allow their states to truly benefit from their point of origin advantage of natural resources.

    12 states produce more energy than they use. ALL export more gas than they use. I have been researching WV. But PA is an even bigger exporter of gas than WV. WV exports 87% of the natural gas it produces. That means that 87% of WV gas severance tax is paid for by exports. Only 13% is paid by instate use.

    WV is currently rebating large energy users 93% of the severance tax. Why not increase the severance tax, and rebate/prebate ALL instate users/rate payers 100% of the associated severance tax of natural gas (perhaps all instate use of coal too!) to allow exported natural resources to truly benefit ALL instate rate payers/users of gas and electricity generated by gas and coal?? That savings, especially to gas and electric rate payers, would allow consumers to increase purchases to additionally drive the states' economies. The lowered cost for instate use would also help attract diversified industries with high paying jobs. (Questions about Interstate Commerce Act – check out The Pike Test).

    Fear mongers say drilling would stop if taxes are increased. First, non producing leases revert back to the mineral rights owners who would then be free to sell their rights to those who would produce. Second, all other producer states could likewise benefit. I'm sure if state legislators saw these benefits to their constituents, they would support what was best for the people and the state rather than what was best for the special interests. If not... when is their next election???

    For WV, an increase from the current 5% state severance tax on gas, to just 10% would mean an approximately $150 million per year to state tax revenues, according to the WV Treasury Office reports. A jump to 33% would yield about $1 billion in severance taxes to benefit the state. PA would be several times more due to their much higher gas export #'s.

    This amount of severance tax is truly minor compared to the trillions of dollars in profits the huge oil and gas conglomerates will be earning from producer states' exports. So far their lobbyists have gotten state legislators in every state to write laws and regulations that benefit these special interests more than benefit their own states' taxpayers. It appears they have pitted one state against another rather than any unity of common interest.

    In WV with natural gas, WV is about to repeat the history of exporting coal and electricity to drive the U.S. economy, leaving WV with about the worst poverty rate in the nation. ALL producer states MUST do something to finally, truly profit from their vast natural resources. This is a bipartisan issue with a bipartisan solution that is actually what is best for the people. Call your legislators or history will repeat. Feel free to copy and paste anywhere to let all voters know.
    Stephen McElroy


Subscribe To Receive Updates:

Enter your email address:

Delivered by FeedBurner