State legislature again avoids actual severance tax on natural gas
Harrisburg, PA (Sept. 11, 2017) – The Pennsylvania State House Energy and Environmental Resources Committee Tuesday approved an amendment gutting Representative Kate Harper’s bill proposing a modest severance tax. The amended bill now strikes any semblance of a real severance tax on natural gas and instead renames the existing “impact fee” a “severance tax” in an act of legislative deception.
“This move shows the blatant actions representatives now take to serve the natural gas industry rather than the people of Pennsylvania, hiding behind semantics and giving the industry another pass,” said PennFuture President and CEO Larry Schweiger.
Conservation Voters of PA Executive Director Josh McNeil said, "George Orwell would have recognized the actions of this committee today. It's funny that what they called 'the Maher amendment,' the rest of the world calls 'a blatant attempt to mislead the public and avoid doing the right thing for Pennsylvania.'"
A recent PennFuture blog post on the amendment by Director of Policy Matt Stepp states:
“Taking an ‘Impact Fee’ and renaming it a ‘Severance Tax’ is like saying they balanced the state budget by passing a law that changes the word ‘debt’ to the word ‘surplus,’ or rebranding carbon pollution as ‘good for farmers and agriculture’ and calling it promising for the planet. Instead of debating a real severance tax, the legislature renamed an existing fee, and called it a good day’s work.”
Pennsylvania is the only natural gas producing state that does not charge a severance tax on the gas produced. The industry has been trying to refute this charge by claiming that the Impact Fee they are charged is the same as a severance tax. The reality is that they are two very different things and the distinction means Pennsylvania taxpayers are leaving hundreds of millions of dollars in potential revenue on the table.
Pennsylvania’s Impact Fee is an annual charge on gas wells that is tied to the price of natural gas and declines over time. It’s structured to provide more revenue as the number of gas wells increases. Revenue flows back to municipalities to invest in fixing infrastructure degraded or oversubscribed by increased industrial use. It’s a popular program and serves an important purpose, supporting local municipalities with small local tax bases to deal with rising infrastructure costs.
On the other hand, a severance tax charges a percentage of the average market price of the gas extracted, plus a flat fee for every thousand cubic feet of gas extracted. It’s structured to provide more revenue as the price of gas increases, or as the amount of extracted gas increases.
“It’s easy to see why the gas industry doesn’t want a severance tax and pushes the argument that we already have one,” Stepp goes on to state in the blog post.
As the value of gas increases, a severance tax would become more lucrative, whereas Impact Fee revenue would remain static or decline. Keeping the Impact Fee is more profitable to an already very profitable gas industry.
PennFuture and Conservation Voters of PA stand by the fact that this amendment does nothing for the Commonwealth’s budget, and again, does everything for the natural gas industry.
PennFuture is leading the transition to a clean energy economy in Pennsylvania and beyond. We are protecting our air, water and land, and empowering citizens to build sustainable communities for future generations. For more information, visit www.pennfuture.org.
Contact: Stephanie Rex
Director of Communications