Job-Killing Marcellus Energy TAX Emerges

A new TAX on Marcellus Shale appears on the horizon. Below is a summary of the behind-closed-doors deal struck by a handful of legislators and staff, according to a memo obtained by Capitolwire (subscription):

The Framework

Instead of counties having the option of imposing a fee to compensate for specific uncompensated impacts of drilling (as Gov. Tom Corbett originally proposed), counties can tax drillers. The impact tax would be partly based on natural gas prices, not based on any actual impacts.

  • Depending on natural gas prices, the tax would generate between $190,000 and $355,000 per well over 15 years. In contrast, Gov. Corbett’s fee proposal was for a maximum of $160,000 per well over 10 years and the Senate bill was $360,000 per well over 20 years.
  • Counties have the option not to tax local Marcellus wells. However, municipalities with the majority of the population have the power to force the county to impose the tax.

Distribution of Marcellus Energy Tax Dollars

An assortment of local and statewide programs unrelated to the industry would be financed through the tax. The Unconventional Gas Well Fund would designate a portion of funds to:

  • County Conservation Districts
  • State Conservation Commission
  • Fish and Boat Commission
  • Public Utility Commission
  • Department of Environmental Protection
  • Pennsylvania Emergency Management Agency
  • State Fire Commissioner
  • Rail freight assistance
  • Natural gas energy development

After this, drilling counties that tax drillers would keep only 60 percent of the remaining revenue. The other 40 percent goes to statewide initiatives, such as:

  • Greenways and trails, via the Commonwealth Financing Authority.
  • The repairing of county public bridges.
  • Funding projects relating to liquid natural gas, via the Department of Community and Economic Development.
  • The Oil and Gas Lease Fund which doles out money to (the Environmental Stewardship fund). Growing Greener subsidizes a wide range of projects, from alternative energy to downtown redevelopment; these project areas alone received more than $60 million. The program provided a Philadelphia County high school with $1 million for geothermal heating, and $250,000 for the Philadelphia Museum of Art’s Outdoor Sculpture Garden.
  • Finally, there’s the Natural Gas Energy Development Fund, which gives grants to develop natural gas fleets.

Some of this funding will be used as corporate welfare to attract a chemical process, i.e., “cracker” plant.  As Nate explained last week, Pennsylvania needs a friendlier business climate, not more corporate welfare.

Politicians are singling out the drilling industry, which is creating tens of thousands of jobs, rescuing families from foreclosure, generating prosperity for small-business owners and lowering energy rates. Natural gas companies should not be required to sustain programs unrelated to the industry, nor should they be forced to subsidize related industries such as natural gas vehicles.

Click here to tell your legislators to vote against a tax on Marcellus Shale drilling and for job growth and affordable home energy in Pennsylvania.

To learn about a principled impact fee, click here.