Energy company reconsiders plans to drill on Harmar land
Huntley & Huntley Energy Exploration says it is reevaluating its leasing efforts in Southwestern Pennsylvania because of Gov. Tom Wolf's proposed severance tax on natural gas extraction.
The company cited the uncertainty generated by the proposal and potential “economic barriers” Wednesday in a letter to Harmar Township withdrawing a subsurface lease offer for about 90 acres of township-owned land.
A meeting on the proposal set for Thursday is canceled.
“We have to invest serious capital in our business,” said Paul Burke, Huntley & Huntley's vice president and general counsel. “We want to see what's going on in this commonwealth before we invest.”
No one from the governor's office returned a call seeking comment.
Burke said the Harmar lease is the only one proposed with a public entity. Most of the company's leases are with private landowners.
However, a lease proposal from Huntley & Huntley and Range Resources is still being considered in West Deer, where Township Manager Daniel Mator said the companies have proposed a subsurface lease for 150 acres of township property. Supervisors have scheduled a public hearing on the lease for March 11.
A call to Burke late Wednesday for clarification was not immediately returned.
The company had proposed a payment of $3,500 per acre, plus a 15 percent royalty to Harmar.
Township Supervisor Bob Exler said it's unfortunate the township is losing the opportunity.
“It's big money for a small township,” he said. “It was something I thought would be a windfall for us, and I'm sad they canceled.”
Gov. Tom Wolf touted his severance tax proposal during a Monday visit to Monroeville.
He wants the state Legislature to impose a 5 percent severance tax on the value of gas that drillers extract and a levy of 4.7 cents per thousand cubic feet.
He said the state Independent Fiscal Office has estimated this would amount to a roughly 5.8 percent tax on natural gas.
Wolf wants to use the revenue to fund public schools.
The industry pays an impact fee on Marcellus shale natural gas wells. It has generated $630 million in three years.
The money goes to counties and municipalities. Wolf has said under his proposal, municipalities would receive a share of the severance tax revenue.
David Spigelmyer, president of the Marcellus Shale Coalition, an industry group, said in a recent statement that drilling companies pay business taxes in the state, have paid out millions in royalties to residents and employ hundreds of workers.
Because of low oil and natural gas prices, many companies have slowed operations.
Adding a tax would only cause companies to further restrict capital investment, according to the Marcellus Shale Coalition, an industry group.
“Labor leaders, small businesses, as well as local and county government share our deep concerns about the negative effects, especially as it relates to job growth and community investments from shale impact tax revenues, that even higher energy taxes will have on the commonwealth's economy,” Spigelmyer said in a statement.
Jodi Weigand is a staff writer for Trib Total Media.