PA Rep. Bud George: PA needs severance tax on gas drillers

Gas drillers aren’t paying their fair share

By Patriot-News Op-Ed

by Rep. Camille ‘Bud’ George

It feels more like Halloween than Thanksgiving for many Pennsylvanians.

Poverty is worse than first believed. Using a formula that accounts for rising Medicare premiums, deductibles and a coverage gap in the drug benefit costs, a recent report said almost 47.5 million Americans lived last year in poverty, seven million more than the government’s official figure.

It’s debatable which is scarier: that the government wasn’t incorporating skyrocketing health care costs when determining poverty or that almost 19 percent of Americans 65 and older — nearly 7.1 million people — are living in poverty.

Last year, the Low-Income Home Energy Assistance Program — LIHEAP — was praised for providing real help for Pennsylvanians struggling to stay warm.

This year, income limits are harsher and grant amounts reduced as LIHEAP opens for the season. An individual making up to $16,245 — and a family of four making up to $33,075 — could qualify for LIHEAP. Last year’s income guidelines were $23,110 for an individual and $44,443 for a family of four.

Shared pain was the dubious promise of the 101-day-late state budget. However, one industry came away pain-free — the gas drillers in Pennsylvania’s Marcellus Shale deposit.

The industry is shelling out millions of dollars in campaign contributions and lobbying efforts to continue the ruse that the embryonic industry is struggling establishing a beachhead in Pennsylvania while facing investment-strangling low gas prices and the specter of unfair taxes.

The Tiny Tim act won’t work.

Pennsylvania is the only state among the top 15 gas-producing states not to have a severance tax. The drillers of more than 70 percent of the Marcellus Shale wells in Pennsylvania are limited liability companies not subject to the state’s corporate net income tax. Only about 30 percent of corporations pay the income tax.

Some of the Marcellus drillers have headquarters in Pennsylvania but are registered in Delaware, enabling them to take advantage of the infamous “Delaware loophole” and further stiff Pennsylvania taxpayers.

Range Resources, a major driller in Pennsylvania’s Marcellus Shale, was recently touted in The Patriot-News as one of the 20 best large-cap stocks. Range Resources’ stock price jumped 99.9 percent in the last year.

At a gas drillers’ conference in June, a Range Resources executive noted that the industry was seeing a 30 percent rate of return even with gas around $4 per thousand cubic foot and could expect a 70 percent rate of return when gas hits $7, as is expected soon.

Chesapeake Energy is up more than 79 percent, and announced recently that it is “now the largest leasehold owner in the Marcellus, the most active driller and expects to become the largest producer of natural gas from the play by year-end 2009.”

Pennsylvania deserves a return for the extraction of its natural gas, the wear-and-tear on its infrastructure and use of its water. A gas official conceded, “the local governments need to get some of this money back. I mean, we are on their roads.”

House Bill 1489 — the Natural Resource Severance Tax Act — would devote gas revenues to the municipality and the county where natural gas is extracted, the Liquid Fuels Tax Fund, as well as to LIHEAP, environmental stewardship and state government.

Gov. Ed Rendell said he will work to implement a severance tax by next July. It will be welcome relief for Pennsylvania taxpayers unfairly shouldering the tax burden.

The frights and fears of Halloween linger for many Pennsylvanians facing tough times.

Meanwhile, gas drillers have much to be thankful for as they get the treats at the expense of tricked Pennsylvania taxpayers.

Camille “Bud” George is majority chair of the House Environmental Resources and Energy Committee.

3 thoughts on “PA Rep. Bud George: PA needs severance tax on gas drillers”

  1. Read counter point in NY Times showing tension between the boom and possible water contamination due to the hydraulic rock fracturing technique: “Pollution Fears Creating a Reaction Against Natural Gas Boom”

    Brief excerpt: “And a more worrisome possibility has come to light. A string of incidents in places like Wyoming and Pennsylvania in recent years has pointed to a possible link between hydraulic fracturing and pollution of ground water supplies. In the worst case, such pollution could damage crucial supplies of water used for drinking and agriculture. …”
    See earlier installments over the past few weeks also.

    One found by searching N Y Times on “Marcellus shale” yielded

    “At Odds Over Land, Money and Gas” or
    from the Nov 28 N.Y. Times.

    Here there is similar material to the above, although there is both pro and con noted. It would seem that taxes would be needed for future compensation of land owners and to make the companies think carefully about their drilling activities, but some want the revenues to defray property taxes.

  2. (i) Last sentence of above comment refers to land owners’ desire to have gas revenues to help them with their own property taxes.

    (ii)Additional material about drilling and fracturing chemicals may be found at “TEDX The Endocrine Disruption Exchange”
    TEDX is said to be a non-profit organization

    Explore the section on “Chemicals Used in Natural Gas Operations”.

    Here’s an excerpt from the introduction to that section:
    “All meaningful environmental oversight and regulation of the natural gas production was removed by the executive branch and Congress in the 2005 Federal Energy Appropriations Bill. Without restraints from the Clean Water Act, Safe Drinking Water Act, Clean Air Act, and CERCLA, the gas industry is steamrolling over vast land segments in the West. Exploitation is so rapid that in less than 6 months in one county, 10 new well pads were built on the banks of the Colorado River, the source of agricultural and drinking water for 25 million people downstream. Spacing has dropped from one well pad per 240 acres to one per 10 acres. From the air it appears as a spreading, cancer-like network of dirt roads over vast acreage, contributing to desertification.”

    More background or context on new cancer producing chemicals may be found at “Cancer From the Kitchen?”

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