Don’t be Penny Wise and Pound Foolish on Environmental Budget

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Starting June 1, against the backdrop of stark economic conditions, the state budget negotiations begin in earnest in Harrisburg.  Many thorny choices need to be made; not just about where budget cuts should occur, but also about where new, reasonable revenues can be secured.

Even before current budget difficulties, environmental programs have often found themselves in the crosshairs of being diverted to help balance the budget or pay for other programs.

In the debate over the 2009-10 budget, both Governor Rendell and Senate Republicans have proposed $77 million to $154 million, respectively, in environmental funding cuts. This is in addition to the proposal to divert $174 million in revenue from State Forest natural gas leases to the General Fund to balance this year’s budget; which, if successful, would be the largest diversion of environmental funding in Pennsylvania’s history.

But there is more bad news.  Next year the majority of funds for the tremendously successful Growing Greener suite of programs to reclaim mined lands, restore watersheds, improve recreation facilities, plug oil and gas wells and preserve open space, will be exhausted.

So what should we do?

Governor Rendell and members of the General Assembly have proposed enacting a severance tax on the hundreds of billions of dollars worth of natural gas production that will be coming from the Marcellus Shale formations in the state.

According to a report recently published by the Pennsylvania Budget and Policy Center, Pennsylvania is the only major fossil fuel-producing state that does not levy a mineral resource extraction tax.  The study also found Marcellus Shale producers, who are accustomed to paying such severance taxes in other states, do not pay Pennsylvania’s Corporate Net Income Tax because of the way they are incorporated.

In light of the extraordinary budget shortfalls facing our state, enacting such a tax – which would simply bring Pennsylvania on par with other states – makes sense, but only if the tax revenue is allocated to environmental programs.

A recent bipartisan poll by a coalition of over 75 environmental, conservation, local government and sporting groups found 87 percent of the public supported using revenues from the enactment of a severance tax on natural gas production to benefit environmental programs.

Pennsylvania has already seen a dramatic expansion of drilling activity in the Marcellus Shale formation, with the Department of Conservation and Natural Resources alone leasing drilling rights on more than 74,000 acres of State Forest land.

The opponents of the severance tax say it would hurt an industry that will bring economic benefits to parts of the state that sorely need them.  There is no question the economic benefits are needed, but when is the right time to adopt a tax?

Coal mining in Pennsylvania began in the mid-1700s, but it was not until 1977 when a per ton tax was enacted by Congress, not the Commonwealth, to help reclaim the state’s 180,000 acres of abandoned mines; and even that tax is under attack every few years.

While today’s companies certainly are not responsible for the sins of the past, shouldn’t we learn something from that past by taking the right steps upfront to protect the environment?

A meaningful percentage of the revenues generated from any severance tax must be reinvested in the environment, public resources and local communities that will bear the greatest impacts of extraction activity.  Public and private water supplies, local infrastructure, natural ecosystems, and recreational assets will all be affected.

We should not miss a chance to secure a dedicated funding source to help address those impacts, as well as to maintain and enhance the very natural resources that generate real economic returns for our state.

The same logic applies to protecting the Oil & Gas Lease Fund, which is comprised of lease revenues from private extraction activities on public lands.  For more than five decades, the Fund has been used to maintain and enhance those same public lands which are enjoyed by Pennsylvanians every day of the year, and help make recreation and tourism the second largest component of our state’s economy.

What You Can Do:

Contact Governor Rendell and your House and Senate member to urge their support for a severance tax on natural gas production that sets aside a significant portion to benefit the environment, to stop the transfer of $174 million out of the Oil and Gas Lease Fund, and to oppose budget cuts to environmental programs that go beyond their fair share.