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Lawmakers won‘t settle on natural gas tax this session
Despite proposals from both parties and governor, consensus not in reach The 2009-10 legislative session will likely end without lawmakers enacting an extraction tax on natural gas. While an agreement was in place between Gov. Ed Rendell and the legislature to pass a tax on the Marcellus Shale industry by Oct. 1, none of the proposals put forth garnered enough support to receive extensive consideration in either chamber. The tax plan crafted by House Democrats would’ve set Pennsylvania’s rate as the highest in the nation among shale producers and was viewed by many stakeholders as being oppressive and uncompetitive. “Only in Pennsylvania would some lawmakers think it a good idea to take an industry that holds tremendous economic and job-creating potential for the Commonwealth and its residents and attempt to tax it at the highest rate in the nation,” PA Chamber Vice President Gene Barr said. “If Pennsylvania has to tax the Marcellus Shale industry, the rate should at least be competitive with other drilling states.” Pennsylvania has the highest state and local tax rate among all major shale-producing states, not to mention onerous and costly regulatory burdens. Most drilling companies already pay the Corporate Net Income tax, the Capital Stock and Franchise Tax, leasing fees and royalty payments. Adding a crushing extraction tax on top of that sends a clear message to the industry that their investment and job-creation potential aren’t welcome here. A recent Penn State study found that in 2009, the Marcellus Shale industry added more than $389 million in state and local tax revenue and 44,000 jobs. By 2011, there exists the potential for 111,000 jobs and a revenue contribution in excess of $987 million. The House plan faced other challenges, as members of the Senate questioned the constitutionality of the legislation because the tax language was added to an unrelated bill. Courts have rejected legislation passed in this manner. The Senate offered its own proposal – a graduated plan with a rate that increased after five years – but it never gained traction among lawmakers. As this issue is likely to resurface in 2011, the PA Chamber reminds legislators that while a severance tax may be unavoidable, it should be crafted to address revenue concerns without compromising the job-creating promise of the industry. ### Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business. |
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