The Pennsylvania state Senate approved a bill – SB 1100 – Tuesday that would establish a three percent tax on natural gas drawn from Marcellus Shale; the tax would be retroactive to 2010.
The state Housepassed its own bill – HB 1950 – Thursday afternoon.
The two bills will, maybe, be blended.
The Senate bill would levy a nominal three percent tax over 20 years on Marcellus wells. Each well would be subject to a $50,000 tariff in its first year, decreasing to $10,000 in its 11th and subsequent years.
About 55 percent of the money would go to counties and municipalities hosting the wells to help with Marcellus-related expenses such as road upgrades, additional personnel, and upgrades to emergency services.
The remaining 45 percent would fund statewide programs and agencies such as the Department of Environmental Protection.
The House version would allow counties and municipalities to take a one percent tax, and share it with the state.
On one side of Thursday’s discussion in the House were those who said taxing the job creators was risking having them leave the state for less expensive economic climes.
“Our concern has been about … jobs, jobs jobs,” said Majority Leader Rep. Mike Turzai, R-Allegheny County. “If you vote against this, rest assured you are against private sector job creation.”
On the other side were those who said one percent was not enough to protect the environment and cover future costs.
“Pennsylvania’s casinos are taxed at 55 percent,” said Rep. Rosita Youngblood, D-Philadelphia, “yet this industry has created more than 15,000 jobs at their facilities (and generated) $6 billion in tax revenues.”
Rep. Gregory Vitali, D-Delaware County, said by telephone Thursday he favored a six percent tax on the value of all gas extracted from the Marcellus shale.
“I think a six percent tax is about right,” he said, noting other gas producing states levy similar tariffs. House Bill 33, of which Vitali was principle sponsor, would share the tax one-third to the General Fund, one-third to local governments and one-third to environmental programs such as Growing Greener.
A portion of the General Fund allocation would include funding for DEP, which Vitali said needs additional staff.
“They need more boots on the ground to protect the environment,” he said.
“The industry has been wondering why we are not taxing them,” Rep. Dan Moul, R-Adams County, said in a previous discussion; he has favored a 4.5 percent tax.
In fact, the industry proposed a 2.5 percent severance tax, a point that was not lost on several speakers urging a No vote on HB 1950.
“Drillers in Pennsylvania would also pay less under the Senate bill than they do in Arkansas, Texas, Wyoming and many other energy-rich states,” Pennsylvania Budget and Policy Center Director Sharon Ward said in a statement issued Tuesday
The PBPC has calculated effective drilling tax rates of 3.4% in Arkansas, 5.4% in Texas and 6.1% in West Virginia on comparable deep gas wells, Ward’s organization has said.
The immediate effects of Marcellus drilling is mostly seen in road repair and upgrading, made necessary by the huge number of trucks hauling equipment and water to and from the drilling sites. To be fair, it has been in the industry’s best interests to upgrade the roads as they move into new areas.
DEP inspectors and permits also cost money, but that agency has increased permit fees and reorganized its workflow to provide more consistent inspections. DEP Secretary Michael Krancer said this week the Office of Oil and Gas Management has implemented a more detailed electronic inspection form for use in all three regions where drilling is under way, and is working to develop additional training for inspectors and water quality specialists.
And Wednesday, Krancer told theU.S. House of Representatives’ Subcommittee on Water Resources and Environment the state is capable of governing Marcellus shale production without “federal interference.”
But history shows that massive development in any industry can lead to massive problems, sometimes long after everyone has become comfortable. Deep water oil drilling was beneath most environmental radars – until BP’s Deep Water Horizon blew up, killing 11 workers and pouring nearly 200 million tons of crude oil into the Gulf of Mexico, coating shorelines from Texas to Florida.
Cleanup and wetland remediation will take years.
In Pennsylvania, nearly two centuries after King Coal began mining anthracite in the region along what now is Interstate 81, rivers still carry runoff from abandoned mines. Hundreds of the mines collapse each year, Kelly Ann Butterbaugh reported in the November issue of PENNlines, a publication of Adams Electric Cooperative. Cleanup is being done by several organizations, but it will take “hundreds of years and billions of dollars.”
Who is paying for the coal cleanup?
“Everyone knows who made the mess,” Butterbaugh wrote, “(but) many of the mine companies that caused the damage no longer exist, leaving the cleanup on someone else’s shoulders.”
Accidents can occur, and already have. The industry already has been made to pay to supply drinking water to Pennsylvania residents whose water has been contaminated by drilling accidents or improper well casing. In April, a well blew in Bradford County, spilling thousands of gallons of fracking fluid onto the ground and causing the evacuation of at least seven families.
Meanwhile, far from the drilling fields, plans are being considered to pump three million gallons of water a day more than 30 miles from the Susquehanna River to Gettysburg Municipal Authority, to provide drinking water for anticipated residential developments. What happens if that water becomes unusable?
A few miles farther downriver lies the Chesapeake Bay. Pennsylvania farmers have been paying millions of dollars to remediate their contribution to the bay’s pollution. Companies profiting from the gas strike should put some money aside – in the form of a severance tax – for similar purpose.
And there are unanswered questions about who will remove wellheads and pipelines from state forests and parks once the gas is exhausted.
The severance tax should not be used to build a swimming pool in Gettysburg or a new library in Clarion. It should be used to fund DEP staff to oversee drilling operations now, and land restoration later. It should be used to re-fund Growing Greener, to protect land that protects the state’s water supplies.
It’s not like the drilling companies are going to pack up and go someplace else. They drill where the gas is, where they can make a profit from extracting and selling it.
A reasonable tax for the future of our grandkids is not going to make Range Resources, Chesapeake Energy, or Cabot Oil and Gas, or any other company, leave the state and abandon billions of dollars in anticipated profits.
Considering the money Pennsylvania residents have put into cleaning up after the coal industry, and spent preserving state forest land, a one percent tax seems less than reasonable.
Photo by Tom Owad
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