General Assembly Must Meet Commitment To Pass Severance Tax For Environmental Funding

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The Pennsylvania Environmental Council called on members of the House and Senate and Governor Rendell to follow through on their commitment to enact a Marcellus Shale natural gas production severance tax to support environmental and conservation programs that have run out of money or been cut severely over the last two years.

“The very successful Growing Greener Program supported now by two governors is all but out of money,” said Don Welsh, President and CEO of the Pennsylvania Environmental Council.  “State agencies like the departments of Environmental Protection and Conservation and Natural Resources had their General Fund budgets cut by 20 to 25 percent and more over the last two years.

“A Marcellus Shale production tax is a fair way to raise the funds needed to support these worthwhile environmental programs which are needed to meet federal Clean Water Act and other mandates not funded through oil and gas permit fees; and to restore the budgets of our critical environmental protection and natural resource agencies,” said Welsh.

An independent study released last week by Penn State University demonstrated enacting a severance tax on natural gas would result in significant, overall economic benefits for the Commonwealth.

“In recent days, we have seen a shift in the position of some legislators to support using severance tax revenue to pay for roads and other infrastructure damaged or needed to drill wells and produce natural gas.” said Welsh.  “We think that is a mistake.  State lawmakers and the Governor need to hold the natural gas industry responsible for directly paying for the impacts of their activities on the environment, communities and public infrastructure, not through a severance tax.

“We also believe linking enactment of a severance tax to complex property rights issues like pooling is a cause for concern,” said Welsh.  “While Pennsylvania’s laws relating to the effective development of the Commonwealth’s Marcellus Shale gas reserves need to be updated, members of the General Assembly do not have sufficient time in the remaining two weeks to openly evaluate any such changes.”

Severance tax proposals under consideration could generate approximately $100 million or more per year in state revenues.  It is estimated that as many as 35,000 to 50,000 new gas wells will be drilled in Pennsylvania over the next twenty years.

“The budgets of DEP and DCNR have taken budget cuts far out of proportion to other state operations, and funding levels must be returned to prior levels,” said Welsh, “This is particularly worrisome when the challenges of oversight of this rapidly growing industry, in addition to other pressing state and federal mandates, are before the agencies.”

PEC supports dedicating a significant portion of a natural gas severance tax to the state’s Environmental Stewardship Fund, which is the primary means of funding Growing Greener, the single-largest investment in environmental programs in Pennsylvania’s history.

Since 1999, Growing Greener has invested hundreds of millions of dollars to address some of the state’s most pressing environmental problems, spark new growth in core communities, and create new opportunities for citizens.  It has successfully generated billions of dollars to the Pennsylvania economy in jobs, taxes, tourism, and other revenue.  Renewing and refocusing funding for Growing Greener is an essential investment in the state’s long-term prosperity.

Earlier this year, PEC has released its own report, called “Developing the Marcellus Shale” to provide specific recommendations on updating Pennsylvania’s regulatory program in light of the rapid development of new, unconventional drilling activities across the Commonwealth.  PEC considers these recommended changes to be vital to the successful development of natural gas resources.

“The General Assembly and Administration must undertake an open and concerted effort to ensure that Pennsylvania’s regulatory program reflects the escalating growth of unconventional shale gas extraction” said Welsh.  “DEP and DCNR have provided tremendous leadership on new challenges, but we only have one chance to get this right and that chance is now.”