Marcellus Shale Tax Finds New Backers

Washington, PA Observer-Reporter
17 March 2009
By Michael Bradwell, Business editor

A coalition of environmental groups said Monday they're launching a campaign in support of a severance tax on natural gas drilling from Pennsylvania's Marcellus Shale strata.

The various groups, which range from the Pennsylvania Fish and Boat Commission to the American Farmland Trust, said during a telephone news conference that they want a portion of any severance tax dedicated to conservation purposes in the state.

The group also released a survey that showed that a majority of Pennsylvanians would support a tax on natural gas drilling.

In February, Gov. Ed Rendell proposed a new severance tax of 5 percent on the value of natural gas at the wellhead, plus 4.7 cents per 1,000 cubic feet of natural gas severed. According to the Rendell administration, the new tax could generate projected state revenues of $107 million in the first year, starting Oct. 1, increasing to a projected level of $631.9 million for fiscal year 2013-14.

At the time Rendell announced the proposal as part of his 2009-2010 budget, both the Marcellus Shale Committee of the Independent Oil and Gas Association of Pennsylvania and the Pennsylvania Oil & Gas Association issued statements opposing the tax.

The drilling industry has suggested that Pennsylvania could realize more revenue from expanding development of natural gas resources on state-owned land.

Lou D'Amico, executive director of IOGA, was not available for comment on Tuesday's news conference.

Jan Jarrett, president and chief executive officer of Citizens for Pennsylvania's Future, which led Monday's announcement, said in a news release that while the Marcellus Shale holds the potential of someday providing hundreds of trillions of cubic feet of natural gas, its extraction will have an impact on the environment.

"The Marcellus Shale offers us a tremendous opportunity to expand our supply of domestic fuel and, through the proposed severance tax, bring revenue into the state, at a time when our budget forecasts are so dire. But it also offers a tremendous risk to the land, water and wildlife that makes Pennsylvania so special."

During the news conference, Andy Loza, executive director of the Pennsylvania Land Trust, noted that 39 states tax the extraction of natural gas.

"It's only fair and reasonable that drillers pay this tax," Loza said.

The levy also has the support of state Rep. David Levdansky, D-Elizabeth.

"Our Game Commission and Fish and Boat Commission are in difficult financial straits, constantly underfunded as they carry out their duty to protect our land and water," Levdansky said in a release. "It is vital to remember that the commissions are charged under state law to protect and manage all species in the interests of all Pennsylvanians. Therefore, it is appropriate and worthy to use a portion of the severance tax to invest in the work of the commissions to improve habitat and public access to our land and water and to grow our burgeoning wildlife recreation industry."

Matt Pitzarella, spokesman for Range Resources Appalachian division in Southpointe, which has more than 900,000 acres leased in the state's Marcellus region, said Monday it's too early to start taxing drillers.

"It's just the wrong signal to send to the investment community," Pitzarella said. "All we want is a business climate for the Marcellus to be developed."

Pitzarella noted that most of the other states that impose a severance tax on drilling also exempt unconventional plays like the Marcellus. He noted that while Texas has a severance tax, it exempts wells drilled in the Barnett Shale. Oklahoma exempts wells drilled in the Fayetteville and Haynesville shale deposits, he added.

David Metz, senior vice president with Fairbank, Maslin, Maullin & Associates, said the bipartisan poll of 600 voters was conducted from Feb. 28 to March 3 with Public Opinion Strategies.

According to Metz, 53 percent of respondents said they would support a severance tax, while 37 percent said they were opposed.

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