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Pennsylvania

'Historic' severance tax goes before Pennsylvania House

| Wednesday, Sept. 29, 2010

HARRISBURG — A plan by House Democrats to levy a tax on natural gas faces a final vote tonight, and its prospects for passage increased substantially thanks to a new provision that shifts more revenue to environmental programs.

An amendment by a Republican lawmaker boosting funding to environmental programs was approved overwhelmingly Tuesday night. House Majority Leader Todd Eachus, D-Luzerne County, said it will draw more support for the bill, which appeared to be faltering earlier in the day.

Still, the chances for Senate approval of this particular bill remain slim.

At the rate of 39 cents per 1,000 cubic feet, the proposed tax would be one of the highest in the nation and would drive away investment, said Jeff Ventura, president and chief operating officer of Range Resources, a Fort Worth company with offices in Cecil. The company drilled the first commercial gas well in the Marcellus shale and ranks among the state's top producers.

"That's a real job killer, and that's going to drive industry out or keep people out if they impose a tax like the one they have on the table today," Ventura said.

If the bill goes to the Senate, it is certain to be scaled back. As part of a July budget agreement, House and Senate leaders of both parties agreed to approve a severance tax by Friday.

Erik Arneson, a spokesman for Senate Republicans, said "even if it does pass the House, this is not an approach that would win majority support in the Senate.

"The logic of imposing a highest-in-the-nation tax on what is one of the few bright spots in Pennsylvania's economy right now eludes us," Arneson said. "We support a competitive tax rate with a distribution plan that adequately supports both environmental projects and the local governments being impacted by Marcellus shale development."

"This tax is long overdue," said Rep. Camille "Bud" George, a Clearfield County Democrat who chairs a panel with environmental oversight. The industry has been operating for four years in Pennsylvania and millions in tax revenue have been lost by local governments and the state, he said.

"Out-of-state gas companies are reaping huge profits" while streams have been polluted, George said.

Eachus called the bill a "historic" effort to protect the environment.

Pennsylvania faces a projected $4 billion deficit next year. In its first full year in 2011-12, the tax would bring in $316 million, said Johnna Pro, a spokeswoman for the House Appropriations Committee. The revenue goes to the state, environmental programs and local governments.

An amendment by Rep. Kate Harper, R-Montgomery County, flipped the porporrtion of money going to the environment versus state coffers. Under her measure, it is now 60 percent for the environment versus 40 percent for state coffers — after the first $75 million goes to the state's General Fund.

"If you're going to have a tax, be responsible with it and be reasonable," said Matt Pitzarella, Range Resources spokesman. The executives met with the Tribune-Review editorial board yesterday.

Ventura said he favors a tax that allows companies to recoup their capital investment by delaying the levy on initial production or reducing it during the early stages of well production. The state would collect most of its money over the rest of the life of the well, which could last 40 to 50 years, he said.

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