Lack of Tax on Gas Decried

Protesters storm Marcellus Shale lobbying firm

Pittsburgh Post-Gazette
10 March 2011
By Tracie Mauriello and Laura Olson, Post-Gazette Harrisburg Bureau

HARRISBURG -- Environmentalists and laborers joined forces Wednesday to bring the fight over state funding to a three-story brownstone that is home base for lobbyists representing the Marcellus Shale Coalition.

About 250 of them marched eight blocks then streamed into former Gov. Tom Ridge's lobbying firm to deliver this message: It's unconscionable for current Gov. Tom Corbett to slash education funding and lay off state workers when energy companies aren't paying taxes on the natural gas they extract.

Clutching protest signs and chanting slogans, the activists marched into the Ridge Policy Group offices, a block from the Capitol. Pouring through the door, they began taking over rooms and stairwells, demanding that someone from the lobbying firm speak to them.

Upstairs floorboards creaked and groaned under feet that stomped in rhythm to a cacophony of chants, some emitted over bullhorns.

The scene epitomized the polarizing effect of the $27.3 billion spending plan that Mr. Corbett unveiled Tuesday to the outrage of environmentalists, state workers, educators and college students.

Mark Campbell, a partner in the firm and Mr. Ridge's one-time chief of staff, told protesters that the shale coalition already has said it would support a reasonable severance tax. He said he couldn't answer any other questions but promised to tell his clients the group wanted to speak with them.

"We'll be back" the activists chanted, leaving behind a mock invoice for $117 million -- the amount they estimate that the state could collect from an extraction tax.

The governor has refused to enact any levies or fees on gas extraction -- or to raise any other taxes or fees. Instead, he wants to balance the state budget through wage freezes, 1,550 layoffs and some of the deepest cuts in memory for education funding. Senate Republicans have suggested raising revenue by leasing more state forestland to gas drillers. Already 700,000 acres have been made available for drilling. There are 1.5 million acres of state forest within the Marcellus Shale formation.

Others are resistant to the idea.

Wednesday morning, a phalanx of Democratic House members and environmentalists stumped for a bill that would prevent leasing state land to drillers until at least 2014.

Bill sponsor Greg Vitali, D-Delaware, said a three-year moratorium would allow the Department of Conservation and Natural Resources to study the environmental effects of fracking before any more wells are bored. Mr. Vitali's proposal does not affect existing leases and does not apply to privately owned land.

Similar legislation from House Democrats passed the House last year but died in the Senate, as the two chambers attempted to reach a compromise on a gas severance tax. Those negotiations fell through before a levy agreement was reached.

In the absence of moratorium legislation reaching his desk, then-Gov. Ed Rendell signed an executive order banning leasing of additional state forestland.

Mr. Corbett has said he plans to reverse that executive order, but has not yet done so or sought further leasing.

"I have no plans for a moratorium," Mr. Corbett told reporters Wednesday in Malvern during a visit to a Microsoft technology center, where he touted the benefits of tax credits.

Mr. Corbett's budget does count on $65 million from the oil and gas lease fund, which receives annual lease payments, the large up-front leasing bonuses, and royalties once wells on state land are producing gas. That money would be used to fund state park operations and other programs within DCNR.

That fund is expected to end the fiscal year with about $27 million, but $63.3 million in royalties and small annual rents on leased land is projected for next year. Meanwhile, stakeholders are preparing for a protracted battle over whether and how to generate revenue from the Marcellus Shale.

"This is going to be an all-out war," said Rep. Bill DeWeese, D-Waynesburg, who said he doesn't oppose Marcellus Shale drilling as long as the environment is protected and energy companies pay their fair share of taxes.

"For Corbett to cavalierly leave hundreds and hundreds of millions of dollars on the budget room floor by not taxing Marcellus Shale is an outrage of unspeakable magnitude," he said.

Mr. Corbett, though, maintains that an extraction tax would deter energy companies from coming here to create jobs and contribute to the economy.

"There are businesses that have come to Pennsylvania, who've hired [20,000 or 30,000] people up in the areas that have been hard-hit over these last 30 years," Mr. Corbett said. "There are taxes coming in from that."

Travis Windle, spokesman for the Marcellus Shale Coalition, points to a recent Penn State study that showed Marcellus Shale drillers generated $785 million for the state last year. That figure includes corporate taxes paid directly to the state as well as income tax and sales tax paid by employees.

Supporters of the Vitali bill say they are relieved that Mr. Corbett's budget address Tuesday made no mention of leasing more land to drillers. However, they remain wary the governor will move in that direction, particularly as lawmakers clamor to provide more money to areas they believe are underfunded.

"There is a feeling that we may have dodged a bullet [Tuesday] ... but as this budget process moves forward, there is going to be increasing pressure on the administration to concede that some new revenue is going to be needed," said state Rep. Eugene DePasquale, D-York.

"With the philosophy of this administration, the leasing of our state forest land will most likely be the target of that. Without this legislation, there will be a continued vulnerability."

Since the November election, environmental advocacy groups have been organizing more visibly in opposition to gas drilling. A loose coalition of drilling opponents disrupted Mr. Corbett's inaugural ceremony, when their shouts of "Tom Corporate, no way!" -- a reference to the hundreds of thousands in campaign contributions that he accepted from drilling companies -- could be heard over his speech.

While PennFuture, a statewide environmental advocacy organization, has called for a gas severance tax repeatedly over the past few years, small regional opposition groups have become more active as well.

Harrisburg Bureau Chief Tracie Mauriello: or 1-717-787-2141. Laura Olson: or 1-717-787-4254. Philadelphia Inquirer reporter Angela Couloumbis contributed.