Range Official: Deal Will be Struck With Pa. on Drilling Tax
Washington PA Observer Reporter
1 October 2010
By Michael Bradwell, Business editor
mbradwell@observer-reporter.com
A Range Resources official who spent significant parts of the last two
months in Harrisburg working with state senators on natural gas
severance tax proposals related to Marcellus Shale drilling said
Thursday he's confident that a compromise on the tax will be reached
this fall.
Ray Walker, senior vice president for Range's Appalachian Shale
division headquartered in Southpointe, said Wednesday's passage by the
state House of a bill that would impose the state's first-ever tax on
natural gas extraction will face strong deliberation in Senate
chambers.
The House-passed measure sets a rate of 39 cents per 1,000 cubic feet,
which a legislative analysis projected would net more than $316 million
in 2011-12, its first full year, and would rise to $578 million by
2014-15.
The House measure, which passed 104-94, advances efforts to collect
revenue from a statewide drilling boom taking place in the Marcellus
Shale fairway, which covers a wide swath of Pennsylvania.
The House bill's passage was hailed by environmental groups as a
"reasonable and robust tax." It would dedicate 60 percent of revenue
for environmental needs and local municipalities, with the rest going
into the state's general fund.
However, for the first three years, the split would be made only after
the first $70 million goes to the general fund and $5 million for job
training.
While Walker said Range supports a severance tax and the House bill's
intention to return a significant portion of revenue to local
municipalities and conservation efforts, he said the levy that passed
the House is too high for his industry.
"Thirty-nine cents is completely insane, unreasonable and job-killing,"
he said, noting that if it becomes law, the levy would be twice as high
as West Virginia's 5 percent tax, currently the highest among
shale-drilling states.
But it isn't just the gas industry that sees the tax as being too
onerous.
Most House Republicans voted against the bill, including John Maher,
R-Upper St. Clair. All nine Democrats who voted against it are from
western districts, including Bill DeWeese, D-Waynesburg, and Jesse
White, D-Cecil. Area representatives who supported the bill included
Tim Solobay, D-Canonsburg, Peter Daley, D-California, and David
Levdansky, D-Elizabeth.
"I was the primary sponsor of a severance tax bill when I was Majority
Leader in 2007-08, and I am still 100 percent in favor of a tax," said
DeWeese. "But, I was flabbergasted at the outrageously slender piece of
the revenue pie that was being returned to the townships and other
local municipalities."
DeWeese said he is hopeful that when the bill returns from the Senate
it will have a significantly more "robust slice of the proceeds
generated from the Marcellus bonanza" going to the townships in his
district.
White, who has supported the idea of a local share portion of any
revenue generated from a severance tax, said in a statement Thursday he
voted against the bill for initially putting 70 percent of revenue into
the general fund in the early years of the tax and for what he said was
its unreasonable rate.
"We send enough of our hard-earned tax dollars to Philadelphia and
elsewhere through the state's general fund," White stated. "I wouldn't
be doing my job if I voted for a severance tax that is better for
Philadelphia County than it is for Washington, Allegheny or Beaver
counties.
"This bill would institute the highest tax rate on natural gas
extraction in the nation, and I worry that it would kill the jobs we
have worked so hard to create through this industry," White said.
"Now that the legislation is back in the Senate for consideration, I
hope that chamber will work to lower the tax rate. I want to see the
millions of dollars generated from natural resources in our region stay
in our region where they belong."
DeWeese said the House Democratic proposal was crafted to be the
largest in the United States. "I was more in favor of having the amount
be somewhere in the middle of the national statistics, possibly
approximately to what West Virginia had," DeWeese said.
DeWeese said he will give a favorable vote to the passage of the
severance tax in short order if the local government share is closer to
80 percent.
"It is now at 40 percent and environmental projects will be
well-funded, but I am still disappointed that my local townships are
being short-changed," he said. "Roads and bridges are tied with water
quality and quantity as my number one priorities."
White is planning a debate on the issues surrounding the Marcellus
shale at 7:30 p.m. Oct. 20 at the Mt. Pleasant Township Fire
Department. His opponent in the November general election, Greg DeLuca
of Beaver County, has been invited to participate.
Walker said he believes a compromise that will produce a lower
severance tax rate will come from the Senate, noting that key
legislators from both chambers are already indicating some kind of
accord. Senate President Joe Scarnati, R-Jefferson, said Wednesday that
the bill did not do enough to help communities that host drilling
activity.
"Listen to what Scarnati and (Majority Appropriations Committee
Chairman) Dwight Evans, D-Philadelphia, are saying," Walker said.
"They're saying Pennsylvania needs to remain competitive with other
shale states.
"I think there will be an agreement in principle fairly soon," Walker
said, adding that while it probably won't come by Gov. Ed Rendell's
deadline of today, it could happen this fall.