Severance Tax

Lindsay Lazarski / Keystone Crossroads

The centerpiece of Gov. Tom Wolf's state budget died its umpteenth death around a negotiating table this week.

Republican legislative leaders emerged from closed-door negotiations with the Democratic Wolf administration to announce that the governor's proposed severance tax on natural gas drillers is a non-negotiable no-go.

AP Photo/Keith Srakocic, File

Gov. Tom Wolf argued last week that taxing Pennsylvania’s booming natural gas industry could help compensate for an anticipated $1 billion structural budget deficit in 2016.

His budget includes a state severance tax of 5 percent on extractions based on the value of gas at the well head and a charge of 4.7 cents per thousand cubic feet extracted. The commonwealth produced 3.23 trillion cubic feet in 2013.

AP Photo/Keith Srakocic, File

When Gov. Tom Wolf was campaigning, he said if elected he would place a severance tax on Marcellus shale gas in the commonwealth, and now he’s moving forward on a plan to do just that. The County Commissioners Association of Pennsylvania, however, doesn’t agree with some changes.

As Pennsylvania lawmakers grapple with finalizing the state budget, and face a financial shortfall, lawmakers and outside groups are calling for a severance tax on the natural gas industry to increase revenues.

The Ohio House of Representatives has voted to increase the state severance tax on oil and gas from less than 1 percent to 2.5 percent. As Pennsylvania continues to debate whether it, too, should impose a severance tax on the booming Marcellus Shale play, some Ohio democrats say the proposed hike is not good enough.

Republican Gov. John Kasich wanted a bigger tax hike, as well. But Ohio Rep. Matt Huffman, who sponsored the bill, said he ended up with 2.5 percent because “that was what I thought we could get done. That was what all parties could agree to.”

Another Marcellus Shale drilling policy, which includes a 5 percent severance tax, is being proposed by a Philadelphia lawmaker.

State Sen. Mike Stack (D-Philadelphia) announced last week that his legislation would impose an extraction tax which would overlap the existing impact fee, a policy that mirrors West Virginia law. The Corbett administration and Republican-controlled Legislature have resisted a severance tax.

Citing a report by Reuters, Stack said Pennsylvania stands to lose more than $20 billion over the next 20 years if a severance tax is not adopted.

Talk of low state revenues is prompting Republicans in the General Assembly to suggest new taxes could be under consideration, including the the ever-polarizing severance tax on natural gas drillers. But there are no clear indicators an extraction tax could pass anytime soon.