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The Deceptive Arguments and Tactics of Severance Tax Advocates

natural gas now - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

Pennsylvania’s severance tax debate has produced some of the most appallingly deceptive arguments and tactics imaginable as advocates lobby for the tax.

Pennsylvania’s severance tax debate is on again. Gov. Tom Wolf, the Commonwealth’s top trust-funder, is making yet another demagogic bid for a severance tax to whip up the greed of “something for nothing” public employee unions. What the debate illustrates, more than anything else, is just how deceptive severance tax arguments made by advocates for the tax really are.

Look no further than this opinion piece by Kirsten Snow that appeared on PennLive for an example of what I mean. Here’s some of what Snow said (emphasis added):

As expected, the governor once again asked for a severance tax on natural gas. If you listened closely, you’d have heard the expected revenue would bring an estimated $248 million to the state’s coffers. That’s $23 million more than it will take to fund his education spending.

Wolf well-positioned the gas tax as equivalent to educating the state’s children.

Pennsylvania is the only state in the nation that does not tax the sale of its natural resources. The only one

Opponents will often recite the worn out talking points that it’s a job killer… but for most of the folks living in the regions where Marcellus Shale is king, they’ve noticed the workers aren’t from Pennsylvania.

Housing and rental costs have risen to take advantage of providing room for out of town workers while forcing low income folks to look elsewhere for limited living quarters. For landlords, it’s a boon, for the residents, it has created real hardship, particularly for seniors on fixed incomes.

And don’t forget large fracking companies’ use and abuse of our roads, bridges and natural resources like clean drinking water.

First, notice the dated nature of the arguments Snow makes. She’s a decade behind the curve with them, as is obvious to any follower of the issues raised regarding natural gas development.

She also dismisses with any thought arguments need to be supported with facts. Simple assertions are always enough with the fractivist crowd, of course. Moreover, they’re essential to the deception, beginning with the idea a severance tax is for “the state’s children” rather than continuing to fund unaffordable public employee union pension deals. Pennsylvania’s pension funds, after being the third most financially stable in the nation in 2001, are now more than $80 billion in the hole.

severance tax

Wolf wants more money for a wealthy Coatesville Area School District and others like it that are too often plagued by “culture of corruption, deception, and mismanagement.” He wants to take it from landowners in places such as Susquehanna County—a county that is finally achieving economic revitalization thanks to Marcellus Shale development. Landowners will pay the severance tax, of course, because gas is a commodity where the market sets the price, not gas companies, and the costs have to passed along to producers when they can’t be passed along to consumers. The tax, therefore, is simple theft of property.

Snow tells us this theft is warranted, Pennsylvania being “the only state in the nation that does not tax the sale of its natural resources.” She even adds “the only one” for greater effect, demonstrating either her profound ignorance or her lying nature on the subject. Pennsylvania’s Marcellus Shale Impact Fee program is a severance tax by any definition. Those fees for 2017 are “projected to top $219 million… $46 million higher than 2016 and push the total generated from the state’s tax on natural gas past $1.5 billion.” Wolf simply wants more.

The “workers aren’t from Pennsylvania,” Snow claims, which is another brazen falsehood. Tell that lie to all those local Lackawanna College School of Petroleum and Natural Gas graduates who got good jobs in the industry. Tell it to the Teamsters working on the Atlantic Sunrise, almost all of whom are Pennsylvanians. Tell it to the over 50,000 people even Tom Wolf admits are employed by the natural gas industry in the Commonwealth, most of whom are employed by local and regional suppliers such as Cleveland Brothers, Taylor Rental and Diaz Transport, for example. It’s hard to imagine a more astounding display of deliberate ignorance on the part of fractivists. It’s pure deception.

And, finally Snow resorts to claims of damage to roads, bridges and clean water. But, of course, we know the gas industry has, on top of impact fees paid out that have gone to roads, now plowed literally hundreds of millions of additional dollars into road improvements, upgrading those roads to a much better condition, as this before and after photo illustrates:

Severance Tax

As for the water quality impacts, well, let’s just cite that this Susquehanna River Basin Commission (SRBC) conclusion from their 2017 report one more time because it never gets old:

…the Commission’s remote water quality monitoring network has not detected discernible impacts on the quality of the Basin’s water resources as a result of natural gas development

If all these easily debunked ancient claims weren’t enough, Snow resorts at the end of her article to a false analogy comparing Wolf’s proposed severance tax with the Alaska Permanent Fund. It was set up in 1976 as “an investment account for royalties after oil was discovered on the North Slope.” She effectively asks why Pennsylvania can’t do the same.

The answer, of course, is that Alaskans were in the position of being the effective landowners in that case and were collecting royalties. The severance tax she wants would, no matter how you cut it, actually reduce Pennsylvania landowner royalties one way or the other. The fact she doesn’t know the difference tells us everything about the depth of her reporting, which is shallower than a dry brook.

Kirsten Snow, though, is an associate with Triad Strategies, a lobbying firm that represents the SEIU State Council, the public employee union that wants those severance taxes, so none of this surprising.

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