Editor & Publisher, Marcellus Drilling News (MDN)
[Editor’s Note: If the third time wasn’t the charm, the seventh time is surely dead on arrival for Tom the Trust-Funder Wolf’s severance tax obsession.]
As we reported in January, Pennsylvania Gov. Tom Wolf (Democrat) has, for the seventh year in a row, introduced a Marcellus-killing severance tax proposal as part of his annual budget proposal. Yesterday Wolf released the details on his latest severance tax abomination. As he has done in years past, Wolf has an excuse why this is the year a severance tax is really really really needed. The excuse this time? To put PA workers back to work.
Wolf says it’s time for the shale industry to “pay its fair share.” That’s a flat-out lie. The shale industry in PA has been paying its fair share from the beginning. PA implemented an impact tax instead of a severance tax. PA’s impact tax has raised more money than the severance tax in neighboring West Virginia and Ohio combined. Yet, Wolf wants to tack a severance tax *on top of* the existing impact tax. By doing so he would create the biggest tax on oil and gas in the entire country–driving drillers away from PA and into other states, even to other shale plays.
Be prepared for the media to regurgitate Wolf’s talking points that the shale industry doesn’t pay its fair share. You’ll just have to suffer through it if you live in the Keystone State. The happy end of the story is already written. Republicans control both the House and Senate in PA, and they won’t pass the severance tax. That’s a foregone conclusion. Wolf’s plan is DOA.
Each year Wolf changes the reason why he must dip his hands into the pockets of drilling companies (as well as consumers and landowners don’t forget). This year the reason is to put PA residents “back to work” following the COVID crisis. Wolf, like so many other Democrat governors, chose to shut down his economy, partially in an effort to torpedo Donald Trump and the national economy (yes, we’re serious about that allegation). Wolf harmed his own constituents in the name of preventing the spread of COVID, and now he’s trying to resurrect the moribund economy he created–by taxing the bejesus out of a single industry.
Wolf says he needs $3 billion over 20 years ($300 million per year) fix the damage he’s done, and all of it will come from a severance tax on the Marcellus Shale. We think maybe Wolf has been smoking some of the dope he’s trying to legalize if he really believes the Marcellus industry will fork over another $300 million per year on top of the $150-$250 million per year being supplied already by the impact tax.
Three articles shed light on the Wolf severance tax announcement from yesterday. The first, from Harrisburg’s WHTM-TV (an ABC affiliate) does a good job of summarizing the points on both sides of the tax issue:
Governor Tom Wolf laid out his plan to get Pennsylvanians back to work post-pandemic, but not everybody shares his vision. He laid out his Back to Work PA plan, a plan that would invest $3 billion into workforce development.
It would be funded by a severance tax in addition to an impact fee on the natural gas industry, a 2.8% combination, according to Wolf, which is expected to bring $300 million a year, over 20 years, equating to $3 billion in total.
“Shame on us if we don’t take advantage of it,” Governor Wolf said.
But Republicans say it’s a bad idea, and could actually hurt the Commonwealth’s economy.
“We don’t want the natural gas companies to be fleeing Pennsylvania, and cause our energy industry in the middle of winter to be suffering a crippling blow,” said Jason Gottesman, spokesperson for the Pennsylvania House Republican Caucus.
The money would go towards workforce redevelopment programs for better training, better wifi, more drive-thru career fairs and the like. According to the Governor, 75% of Pennsylvania’s natural gas is purchased outside of Pennsylvania, so the people paying this tax would mostly be those outside the Commonwealth. But UGI, a natural gas distribution company, said that’s not necessarily the case.
“About 90% of the natural gas that we distribute to customers is produced in Marcellus Shale, so we have a significant amount of natural gas that is produced and distributed right here in Pennsylvania,” said Joseph Swope, Manager of Media Relations for UGI.
He added that any increase in taxes would directly impact customers.
“I’m not sure there’s an alternative way to actually do the things we need to do to make the quality of life better,” Gov. Wolf said.
The Marcellus Shale Coalition president issued the following statement in response.
“Gov. Wolf and his team simply don’t get it. Pennsylvania already has a severance tax – it’s the impact fee, which has funded $2+ billion for community and environmental programs across the entire Commonwealth over the last several years. It was disappointing to hear the governor once again call for additional energy taxes that will harm consumers, local jobs, American energy production and the Commonwealth’s ability to recover from the pandemic,” president David Callahan said.
Callahan also pointed out potential flaws in the Governor’s quantitative evidence.
“His fuzzy math – citing a probably wrong tax rate of 2.8% – reflects the unseriousness of his proposal, which has been squarely rejected by leading business and manufacturing organizations as well as a broad chorus of bipartisan lawmakers,” Callahan said. “In truth, the governor’s proposal represents a combined energy tax rate of more than 12%, which would be the nation’s highest.”
A Pittsburgh Business Times article also provides a number of quotes made by Wolf and his toadies yesterday as they pitched his severance tax for the seventh time. And, finally, the Allentown Morning Call writes an in-depth piece that (surprisingly) covers both sides of the issue. Check out these two pieces as well.