EQT Corp. CEO Murry Gerber backs Marcellus severance tax

| Tuesday, April 20, 2010

EQT Corp. Chief Executive Murry Gerber is pushing a proposal opposed by most leaders of the natural gas exploration and production industry in Pennsylvania — a Marcellus Shale-oriented severance tax.

Gerber, who will step down Wednesday after 12 years as EQT's chief executive, plans to lobby officials to overhaul some of the state's laws related to natural gas and to encourage more use by manufacturers, including steel, chemical and pharmaceutical companies.

"I'm sure big manufacturers aren't appreciating the impact of the Marcellus Shale formation in the state," Gerber said. "We have a competitive advantage here because the gas is here and doesn't have to be transported, which is a huge cost to users."

Gerber plans to begin a new career as a spokesman and lobbyist for the natural gas industry when he leaves day-to-day duties at EQT after the company's annual meeting. He will remain with the company as executive chairman through the April 2011 annual meeting.

David Porges, Gerber's hand-picked replacement and right-hand man during his tenure at EQT, assumes the CEO post.

The mile-deep Marcellus Shale natural gas formation is spread over five states, including most of Pennsylvania, and contains enough gas to supply all the nation's needs for more than a decade, a Penn State study found last year.

The severance tax was proposed in February 2009 by Gov. Ed Rendell, but was pulled from consideration in September because the governor said he wanted to give the fledgling Marcellus Shale industry time to get its "sea legs."

But in January, Rendell, faced with a projected $450 million revenue deficit for fiscal 2010-11, said he wants to raise at least $100 million a year from the tax on drilling, to take effect in July. Last year, Rendell proposed a 5 percent tax at the wellhead and 4.7 percent on every 1,000 cubic feet of gas produced.

"When the governor made his proposal, he said that 10 percent of the money raised would go back to the counties and municipalities impacted," said Rendell spokesman Gary Tuma. "We've said all along that this is something up for discussion between the governor, the Legislature, municipal officials and the industry. There is some common ground there."

Gerber's backing of the tax comes with a price — he wants all the money to go directly to municipalities affected by drilling activity to be used for such things as road and infrastructure improvements.

"Most of my competitors aren't happy with my proposal," Gerber said. "Our vision is to have in place a severance tax in concert with key regulatory reform."

Ray N. Walker Jr., senior vice president with Range Resources Corp., said, "Many point to the fact that other gas-producing states have a severance tax, and they're correct. But other states also have a modern statutory and regulatory framework that promotes the growth of the industry, including a well-thought-out severance tax structure."

Range Resources of Fort Worth, Texas, is a major driller and producer in the Marcellus Shale region. Walker is chairman of the Marcellus Shale Coalition, a trade group formed last year.

"What Gerber is proposing, with all the money going to the municipalities impacted, does have some precedent. It's not unusual if you look internationally," said Kent Moors, director of Duquesne University's Energy Policy Research Group.

Moors said when the discussion is concluded, the sharing of proceeds of a severance tax will fall somewhere between Rendell's 10 percent proposal and Gerber's 100 percent return to affected municipalities.

Gerber and Dennis Yablonsky, CEO of the Allegheny Conference on Community Development, plan to work in tandem touting the use of Marcellus Shale natural gas when calling on executives at companies locally and nationwide.

"We intend on encouraging existing companies here to use natural gas, but also will be recruiting strategic companies to come to this area," Yablonsky said. "It really helps to have the stature of a CEO making calls ... that's a pretty good ambassador."

Additional Information:

Natural gas rally

The environmental watchdog group Citizens for Pennsylvania's Future, PennFuture, will host a rally at 9 a.m. today at Gov. Ed Rendell's Pittsburgh-area office at Piatt Place, 301 Fifth Ave., Downtown.

Speakers will urge supporters to lobby the governor and Legislature to freeze new Marcellus Shale drilling leases in state forests and to pass a severance tax on removal of natural gas from land in the state.

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