Natural Gas Taxes Across the States

Gov. Rendell and other advocates for a natural gas severance tax make the claim that Pennsylvania is the only major gas producing state not to impose this tax and therefore should have one. However, this statement neglects the fact that the majority of states with severance taxes delay implementation, offer tax exemptions or credits, or discount the tax in hard to drill areas.

More importantly, most other states rely on a natural gas tax to lower other business taxes – in contrast, Pennsylvania already imposes on gas companies one of the highest tax burdens, and the highest corporate income tax rate in the world.

Below is a sheet highlighting taxes in the top natural gas producing states to show the variation in severance taxes among states.

Pennsylvania’s Marcellus Shale is classified as an unconventional gas well because it requires additional effort and cost to extract the natural gas, it is therefore most helpful to compare taxation in states with comparable shale formations.

Such states often offer a moratorium on any sort of severance tax until the industry becomes profitable. You can find a spreadsheet comparing unconventional shale plays and drilling activity here.