Tuesday, December 16, 2014

Drilling Industry: People In Harrisburg Changed, Not The Impact Of A Severance Tax

Representatives of Associated Petroleum Industries of Pennsylvania, the Marcellus Shale Coalition and the PA Independent Oil and Gas Association Tuesday held a press conference to again express their opposition to a severance tax on natural gas production.
“Some things have changed in Harrisburg, but the crippling impact a severance tax would have on jobs, the economy, and Pennsylvania’s future have not,” said Stephanie Catarino Wissman, API-PA Executive Director. “Priority number one for Gov.-Elect Tom Wolf should be encouraging even more energy driven economic growth. Yet his proposal for a new severance tax threatens to stifle energy production and the jobs that go with it.
“Pennsylvania energy development is sustaining families, saving money for schools and communities, and benefiting consumers. Voters understand that higher taxes on energy undermine private investment, job creation, energy production, and government revenue,” Catarino Wissman said. “Do not fix what is not broken. Don’t break the economic backbone of the Commonwealth.”
“There is no doubt our industry is driven by two interrelated things, investment and profit…investment is attractive to activities that produce the best potential for profit. Not just for the natural gas industry, but for every business enterprise in the world,” said Lou D’Amico, PIOGA President & Executive Director
D’Amico explained under Pennsylvania’s current tax structure profitability is suffering and the industry is facing nearby competition from neighboring states like Ohio and other shale places nationwide and in states with a better comprehensive tax and regulatory environment.
“Given our need for pipelines and other infrastructure this is a long term problem for our natural gas industry,” D’Amico said. “It is an institutional problem and the importance of economics of producing natural gas here cannot be overstated.”
He said a new severance tax will mean less production, jobs, and economic growth in Pennsylvania, and “putting a new severance tax on top of the impact fee will mean a continued drop in drilling activity here.”
“The revenue projections during the campaign season have been wildly over estimated and certainly not supported by the facts,” said Dave Spigelmyer, MSC President.
Spigelmyer explained that since 2008 the pattern of growth and opportunity has made this region a major supplier of the nation’s natural gas, adding the Shale industry has been putting people to work and there is a “tremendous opportunity” to build a manufacturing base, which has been “eroding for the past four decades.”
He noted, “Natural gas rates…are half of what they were in 2008. You are now witnessing a direct impact of (oil) Shale development at the gasoline pump as well.”
“There is no severance tax…that is going to fix Pennsylvania’s fiscal challenges. There are serious fundamental challenges that need to be dealt with on the spending side,” Spigelmyer said.  He said other challenges, like pension reform, need to be dealt with.
In response to media question, David Spigelmyer from the MSC said his group has met with Gov.-elect Wolf to discuss the issues of gas pricing, commodity pricing, and why many big companies are investing in infrastructure in Pennsylvania. He said the one message they made clear was, “If you tax something you are going to do a lot less of it.”
Stephanie Catarino Wissman said Gov.-elect Wolf ran on the issue of a severance tax and the discussion focused on “how much revenue can we get out of this industry,” not what it means for the economy, the current revenue the Commonwealth is receiving from the industry, and what does it mean for jobs.
When asked how legislators feel about a severance tax, Spigelmyer said legislators have made it clear that the focus will be “getting our arms around” the Commonwealth’s spending formulas on issues such as pensions. “Those kinds of issues need to be dealt with front and center before…they deal with issues of revenue.”
(Adapted from reporting by PA Legislative Services.)

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