The Governor's fourth natural gas tax proposal, and 11th tax proposal overall, is now embodied in legislation. SB 1000 and HB 2253 join nine other bills sitting in the House and Senate, all designed to single-out one industry for higher taxes. An industry that is facing a triple threat from rising taxes, permitting delays, and onerous pipeline regulations.
In April we highlighted the investments pouring into natural gas shale producers in southern states, contrasting the relatively stagnant investments in Pennsylvania.
Since January 2015, Pennsylvania’s mining and logging sector lost more than 11,500 jobs and major investment deals continue to pass us by. For example, ExxonMobil announced a $20 billion investment in the Permian Basin (Texas) that will create 45,000 high paying jobs. Meanwhile, Chevron's CEO noted in Pittsburgh, “Chevron Appalachia has been operating at a minimum activity level for two years.”
Claiming higher taxes on our job creators will make Pennsylvania more competitive is complete nonsense. Other states do have severance taxes on natural gas, as Governor Wolf claims, but more telling is the taxes those states don't levy. For instance, Texas does not have a state income tax or corporate income tax. Considering our burdensome regulatory climate, lack of pipeline infrastructure, and hilly terrain, it is no wonder new investment flows elsewhere. An additional tax would simply exacerbate the problem.
The proposed volume-based tax would supposedly equal a 4 percent tax, according to yesterday's press conference. In reality, it's a 5 percent tax assuming natural gas will reach $3 per MCF and factoring in the existing impact fee.
That means Pennsylvania, with all of its business climate challenges, would also levy one of the highest severance taxes in the nation. Higher than both Louisiana and Texas's effective rates.
The governor and lawmakers should be honest about the impact of a severance tax. The truth is, Pennsylvanians like Matt Brewer will bear a heavy burden. Matt owns a small oil and gas service business in Washington Pa. called Hydroedge Solutions. As tax talk continues Matt is looking to do more business across the border in Ohio.
If Governor Wolf has his way, Pennsylvania will lose job creators and still fail to address its budget woes.