Wolf administration hopes ‘groundswell’ support can pass natural gas severance tax
Officials in Gov. Tom Wolf’s administration hope that packaging a natural gas severance tax with a proposal to address community blight and infrastructure needs will give it a better chance of passing the Pennsylvania General Assembly this year.
Several members of the administration Tuesday said there is a “groundswell” of support for the Restore Pennsylvania initiative, which relies on the severance tax for funding.
“The message from all these communities is simply that they need help with infrastructure, they need help with blight,” said Eric Gutshall, secretary of intergovernmental affairs. “This means more tools in the toolbox to solve these issues that have been plaguing these communities for a long time.”
Wolf’s severance tax proposal has been a nonstarter in past years, but the administration is heartened by the support that two bills introduced last week have received so far, the officials said.
“We’re looking forward to see it move and move quickly,” said Deputy Chief of Staff Sam Robinson. “It’s sort of a no-brainer from our perspective.”
Restore Pennsylvania, if funded, would allocate $4.5 billion over five years toward projects in 11 categories, including high-speed internet, blight removal, brownfield cleanup, disaster recovery, green infrastructure and transportation capital projects.
Allocation levels according to category would be overseen by a seven-member board. The severance tax would generate an estimated $300 million a year that would be used to pay down $4.5 billion in bonds over 20 years, officials said.
Unlike the state’s impact fee, which is applied to each new unconventional well drilled into the Marcellus shale, the severance tax would be paid based on how much gas is produced and “severed” from the ground.
Although the impact fee would be retained under Wolf’s proposal, Robinson insisted it would not amount to double taxation on natural gas drillers.
“It’s important to look at the overall effective rate. When you combine both the impact fee and the severance tax we’ve proposed, it’s still competitive with the rates being charged in other states,” Robinson said. “We feel there’s room for the (oil and gas) industry to pay a little more to make these investments in infrastructure.”
Officials deflected Republican concerns that the severance tax would drive drillers out of the state and result in a loss of jobs.
“From our perspective, the industry is here, they want the gas, they want to get it to market. … It would be very shortsighted of them to look at a small (tax) increase … as a reason to completely abandon the state,” said J.J. Abbott, the governor’s press secretary.
During a visit to Greensburg last week, Wolf cited an estimate from the Pennsylvania Independent Fiscal Office saying 80% of the severance tax would be paid by non-Pennsylvanians.
“We’re the only gas-producing state without a severance tax,” Wolf said, citing Texas, Louisiana and Alaska as examples.
On Tuesday, officials said they hope legislation can pass this summer and collections can begin in June 2020.
“We believe the severance tax is overdue in Pennsylvania,” Robinson said. “We think the message we’ve put forward with this very tangible infrastructure package has been resonating in a way that’s more positive than in previous years.”
Even so, the severance tax proposal faces an uphill battle in the House, where Speaker Mike Turzai, R-McCandless, called it a “$4.5 billion, debt-financed slush fund to be allocated at the whim of a new government board and paid for by yet another job-killing tax on the natural gas production industry.”
Stephen Huba is a Tribune-Review staff writer. You can contact Stephen at 724-850-1280, [email protected] or via Twitter .