The proposed Allegheny County lease to drill under Deer Lakes Park exposes the severance-tax myth that all the Democrat candidates for governor are clamoring for.
Under “Royalty Payments,” the proposed lease lists all post-production costs that the driller would be able deduct from royalties paid to the county. One allowable deduction listed is a severance tax or “any tax imposed by any government body that is levied upon the value of production ... .” Translation: Any severance tax on the hugely profitable gas companies will be merely passed on in the form of reduced royalty payments to the county and, by extension, to every landowner/lessor (mostly farmers) in Pennsylvania.
This is outrageous because landowners' gas royalties have already been decimated (by up to 80 percent in Bradford County) since the state Supreme Court allowed all post-production costs to be deducted from royalties in its extremely controversial 2010 Kilmer v. Elexco decision, which also gutted the 12.5-percent-minimum provision of the state's 1979 Guaranteed Minimum Royalty Act. To the contrary, Gov. Corbett's impact fee on drillers is a direct cost of producing an unconventional well and cannot be passed on to the landowner/lessor as a post-production or post-wellhead tax.
Gerald S. Schiller
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