BURNING QUESTION
Lawmakers, lobbyists seeking extraction tax on natural gas drillers
NORRISTOWN >> Standing on the steps of the Montgomery County Courthouse Thursday, three area lawmakers joined members of the Clear Coalition to demand a 5 percent extraction tax on natural gas be included in the 2017-18 state budget.
State Reps. Matt Bradford, D-70, Tom Murt, R-152, and Madeline Dean, D-153, said the need for the tax comes following deep cuts to programs Pennsylvanians care about, including environmental protection and education.
“During tough times, belt tightening is going to have to be part of the equation,” Bradford said. “But what people cannot understand is why can Pennsylvania not enact a meaningful severance tax?”
The battle for the tax has been waged in Harrisburg for eight years and as the state now faces a $3 billion deficit, a severance tax on drilling companies needs to be part of the conversation, he said.
“Believe me, we are not moving in this direction without a great deal of contemplation, without a great deal of consideration,” Murt said. “We are grateful that we have natural gas reserves in the Commonwealth of Pennsylvania. We do not want to in-
"During tough times, belt tightening is going to have to be part of the equation. But what people cannot understand is why can Pennsylvania not enact a meaningful severance tax?" — State Rep. Matt Bradford, D-Montgomery
jure this industry or hurt it or drive it from the Commonwealth. We want them to be successful. We want them to stay here.”
Nearly half the costs of natural gas extraction and distribution are from transportation, and Pennsylvania is in a prime location to access the market in the northeastern sector and the eastern seaboard with natural gas, he said.
For anyone with concerns the money will be “dumped down the black hole in Harrisburg,” Murt said the proposal calls for the revenues to be used to support underfunded programs like the Department of Human Services, the Growing Greener Environmental Stewardship Fund and drug and alcohol rehabilitation.
“This is something that should have been done many, many years ago,” he said. “Had this tax been enacted when it should have been eight or 10 years ago, the financial picture of the Commonwealth of Pennsylvania would be much different, would be much brighter.”
“It is time for the Pennsylvania Legislature to enact a fair, reasonable, adequate, if not excellent, budget,” said Dean, who added that during each of her five years in Harrisburg, she’s seen declining revenues and “anemic budgeting.”
“Part of that anemia is our failure to place a reasonable tax on Marcellus Shale,” she said.
The current fiscal year shows Harrisburg with a $1.2 billion deficit. The new fiscal year, which begins July 1, calls for the state to face a possible $3 billion deficit.
“What do we continue to do?” Dean said. “We continue with anemia. Why do you think we’re low in job growth? Why do you think we’re low in education funding? Because we are not taking the hard choices, the hard steps to say what is reasonable in terms of revenues. What should we be bringing in?”
A tax on Marcellus Shale in 2009 of 5 percent, “we would have accumulated $2 billion in revenues,” she said. “We would not be in the budgetary hole we’re in. We would not see the anemia that see.”
Dean said in 2014 the natural gas industry took $10 billion in value from the ground in Pennsylvania.
“A 5 percent tax would have been $500 million,” she said. “Five hundred million dollars coming into our coffers in revenue. Each year they take billions of dollars in revenue. Last year it was $8 billion. So we’re talking about hundreds of millions of dollars that we have passed on for political reasons.”
The trio’s proposal would not replace the 2 percent impact fee at the wellhead, which Dean said goes to the communities near the drilling wells. Bradford added that Montgomery County residents see “pennies on the dollar” from the impact fee, whereas an extraction tax would see needed state funding go across the state.
“No longer just cherrypick certain communities,” he said.
The impact fee, Murt said, helps small communities upstate with infrastructure repairs, and he does not favor its repeal.
All three legislators had varying degrees of certainty that such an extraction tax would actually make it into next year’s budget. Bradford was optimistic, given the deficit has reached a point where lawmakers who support the oil and gas industry are beginning to run out of options against a tax. Dean was more pessimistic, noting the GOPled House of Representatives cut $815 million out of Gov. Tom Wolf’s budget proposal earlier this year and it did not include a Marcellus Shale tax.
“It tells you their priorities and it worries me greatly,” she said. “They’re a party in the lead but they are failing to lead.”
Murt said he realized many Republicans were not comfortable with the tax proposal, “but we are pretty much out of options right now. I don’t know what else could possibly be cut in the budget.”
It wasn’t just lawmakers who were pushing for the tax. Union members from across our area stood behind the three state representatives to lend their support.