Letter in the Scranton Times-Tribune
Editor: Those calling for a state tax on natural gas extraction – including Gov. Ed Rendell and The Times-Tribune – use poor logic to support their positions.
Higher-than-expected lease bids for state lands from drilling companies convinced the governor that natural gas companies can afford an additional tax.
However, drilling companies were able to bid high for land rights precisely because the state does not have a severance tax. Drilling companies already pay the corporate net income tax or personal income tax, capital stock and franchise tax, leasing fees, and 18 percent royalties.
While proponents of the severance tax draw attention to its implementation in other states, they fail to mention that Florida gives tax credits to small oil and gas producers. Texas reduced its tax by 80 percent in areas that – like the Marcellus Shale – are hard to drill; Oklahoma doesn’t impose the tax until investment costs have been recovered; and Louisiana suspended its severance tax to incent new well drilling.
Advocates for the tax should also be aware more than 26,000 jobs in Pennsylvania come from shallow oil and gas producers that are marginally profitable. In fact, the natural gas industry is one of few industries hiring in Pennsylvania.
A natural gas tax should not constitute merely another slush fund to support Mr. Rendell’s spending habits. A severance tax should not be implemented until the companies recoup the capital costs, and revenues should be tied directly to the environmental costs of drilling.