According to the Fraser Institute’s 2011 Global Petroleum Survey, Pennsylvania remains one of the least attractive places to drill in the world. The state ranks 65, an improvement of one place from 2010 out of 133 jurisdictions worldwide. In the United States, the only states ranking worse than Pennsylvania were Alaska (83) and California (91). (Florida and New York were not included in the survey). And countries such as Morocco (61), Oman (57), Colombia (48), Qatar (33) and Hungary (9) all ranked more attractive than Pennsylvania.
The survey considered 17 different factors focusing on regulatory burden, tax rates, and security risks. In Pennsylvania, investors ranked deterrents to invest highest in regulatory and cost of compliance questions, with the tax regime a relatively small deterrent.
If you’re following the debate around a severance tax on Marcellus drillers, you’ve likely heard the comment “drilling companies will invest here regardless of a tax because the gas is here.” But the reality is new technology is unlocking gas in other places that are more attractive for investors than Pennsylvania, even without a new tax.
While the drilling industry won’t disappear if a severance tax or impact fee is enacted, there will be an impact through reduced investment in the state, lower wages, reduction in job growth or a reduction in spending on things like road improvements.