Thursday, February 12, 2015

Governor Wolf Discusses Oil and Gas Pennsylvania Severance Tax

Gov. Tom Wolf's news conference was broadcast on PCN this morning and a portion of it can be viewed at:

The link to a seven-minute video is the second item on this website at the present time.  It does not include the questions and answers with reporters. Summary of key points, gas industry, perspective:

  • "He answered one question about working with the industry to accept a tax which included the statement,"The alternative is not no tax. It's no drilling, a ban like in New York."  A reporter asked him whether that was a threat, and he said, "No, it is not a threat.  Thank you for allowing me to clarify that."
  • On several occasions, he made the comment that we and other states have "natural resources," not "natural gas" that is appropriate to tax.  He corrected himself at one point when he started to say "natural gas" to instead say "resource..." It will remain to be seen whether the administration advances a broader tax on "extraction" industries in Pennsylvania.
  • He claimed in his opening remarks that the WV tax will reach one billion/year, through the 5 percent and 0.047/MCF approach.   He also said that the bill will protect property owners by not letting producers pass along the tax on royalty payments.
  • He said the impact fee will be rolled into this new tax so communities will continue to receive that money.  The lion's share, however, will be targeted to education, with some to DEP to make sure we do this right and some set aside for investment in alternative energy.
  • Finally, he said the 5 percent on wellhead price plus the $0.047/MCF tax on volume will provide more predictability outside of price fluctuations, calling it a "hedge" against pricing changes.  He stated that West Virginia's tax structure is a "good laboratory and it's one that works.  They have a healthy industry there."   Given the difference in production levels between Pennsylvania and West Virginia over the past several years, the validity of that statement is very questionable. "
My comments
1. Taking this money and pouring down the education hole in PA without addressing the need to reform education spending, pensions, etc - Is a bad idea?
2. Investing the money in just renewable energy is a bad idea?  We can do better with conservation measures, energy efficiency, upgrading infrastructure - the only real reliable alternative energy in PA is biomass and groundsource.   (Commercial scale solar and wind - hit or miss).
3. PADEP - needs a solid investment, but this should come from fees, fines, and the cost of obtaining and maintain a permit.
4. Sorry I think the proposal is short-cited and needs work.
5.What is next on the resource extraction tax?  (Water, food, coal, Gravel, Stone, Wildlife).

6. How about no extraction tax on resources used in PA?  Use this to promote PA manufacturing and energy production.

Just a thought


Pittsburgh, Pa. – Marcellus Shale Coalition president David Spigelmyer issued the following statement on Governor Wolf’s new energy tax proposal unveiled today in Thorndale, Pennsylvania:
“Governor Wolf fails to acknowledge that the natural gas industry already pays significant taxes in Pennsylvania. Natural gas operators pay the same taxes that every other business in Pennsylvania pays, which has helped generate more than $2.1 billion through 2013.  Pennsylvania is the only state that imposes a special impact tax that will have generated nearly $830 million by April of this year, directly benefiting all 67 counties throughout the Commonwealth.  Pennsylvanians have realized more than $700 million in royalties from energy-development on public lands. By any measure, these are significant revenues that are boosting local communities, as well as important environmental programs.  More importantly, revenue estimates fail to account for the more than 200,000 hard-working Pennsylvanians who are employed by or support this industry and generate substantial revenue for the Commonwealth by paying their taxes.
“While we look forward to evaluating the policy details outlined by the Governor today, it’s clear that new energy taxes will discourage capital investment into the commonwealth and make Pennsylvania less competitive. Make no mistake, adding a five percent tax to any business sector – including the energy industry – is going to reduce capital spending and hit the supply chain, especially Pennsylvania-based small and mid-sized businesses, as well as our region’s labor and building trades.
“Pennsylvanians are looking to their elected officials to help create new jobs, not new taxes, especially during these difficult and challenging times within an industry that has reduced energy costs for every consumer and been a bright spot for the Commonwealth’s economy.”

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