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Drilling group says Wolf overestimates expected tax revenue

| Thursday, March 5, 2015, 12:01 a.m.

Revenue from Gov. Tom Wolf's proposed natural gas extraction tax — slated to pay for millions in education funding — could fall far short of projections because his estimates are based on higher gas prices in other parts of the country, industry officials said Wednesday.

“We've been saying all along that you can't get to their budget numbers with these prices,” said David Spigelmyer, president of the Marcellus Shale Coalition. “We keep trying to educate people that that's not what natural gas costs in Pennsylvania. We have a glut of gas without a robust market yet.”

Spigelmyer's comments were made a day after Wolf revealed his proposed budget for the 2015-16 fiscal year, which includes a 5 percent tax on the value of gas at the wellhead plus 4.7 cents per thousand cubic feet of gas extracted to take effect in 2016. The governor projects it will rake in $155.7 million in a shortened 2016 fiscal year but will ramp up to $765.3 million in fiscal year 2016-17, the first full year of the tax, rising to $819 million, $869 million and $948 million in the following years.

Senate Republican Caucus spokeswoman Jennifer Kocher echoed those concerns, saying, “We're not getting anywhere near the projections they are.

“If he's saying he's using the money for increasing funding, I'm not sure how much of a domino effect this has on the rest of the budget.”

Wolf's spokesman, Jeffrey Sheridan, said production projections are based the market price of gas from the Henry Hub pipeline in Louisiana, but are adjusted for prices in Pennsylvania. For 2016, he said, the budget projects the price at $3.25 per thousand cubic feet of gas.

“Production projections are based on data from the (Department of Environmental Protection), which showed that natural gas production in Pennsylvania was at an all-time high in 2014,” Sheridan said.

Spigelmyer said the price of natural gas traded on the futures market is linked to prices paid from the Henry Hub pipeline in Louisiana. Pennsylvania drillers often sell gas for much less. According to the U.S. Energy Information Center, the Henry Hub price was $2.93 per thousand cubic feet (mcf) last week. Prices in different parts of Pennsylvania varied between $1.50 per unit and $2.87, a rare price spike because of the recent cold snap, Spigelmyer said.

“As temperatures warm, those (Pennsylvania) prices will erode,” Spigelmyer said.

Wolf's $1 billion education boost relies in part on revenue from the proposed Marcellus shale tax. Wolf proposes to increase basic education spending by 7 percent, special education by 9.6 percent and pre-K education by 88 percent. Traditional school districts applauded Wolf's plan while the conservative Commonwealth Foundation said it looked like a giveback to teachers unions that supported Wolf in the election.

“I think you can definitely draw the line from the public sector unions, the teachers unions, to more tax dollars for education,” said Nate Benefield, vice president of policy analysis at the Commonwealth Foundation. “And really to defund cyber schools and to force charter schools to turn back over unused money to districts. That's certainly favoring unionized school districts over schools of choice.”

Benefield said the Pennsylvania State Education Association gave $800,000 to Wolf's campaign, while the American Federation of Teachers gave $662,000, Philadelphia Federation of Teachers gave $110,000 and Pittsburgh Federation of Teachers gave $25,500.

PSEA spokesman Wythe Keever blasted the giveback characterization, saying Wolf is proposing to restore funding cut during the past four years.

“Students are the biggest beneficiaries of the governor's budget,” Keever said. “Does (the budget) help teachers? Yes, but you can't help students without helping teachers.”

Keever said the PSEA is not anti-charter school, and the union represents some cyber charter school teachers.

Wolf's budget includes the requirement of an annual audit of charter school costs, requiring them to refund unused money to their students' home districts. He also plans to change the funding stream for cyber charter schools, reducing district payments to $5,950 per student, instead of a by-district formula.

Bob Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools, said the moves are an attempt to kill charter schools.

“It doesn't permit the charter schools to keep any fund balance,” Fayfich said.

Separately, the House on Wednesday passed its own charter school overhaul that supporters say will save school districts $27 million annually.

Bobby Kerlik is a staff writer for Trib Total Media. He can be reached at 412-320-7886 or bkerlik@tribweb.com.

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