Statement on Severance Tax Discussions

Resources

Davitt Woodwell, Executive Vice President for PEC, issued the following statement today on state budget negotiations and the potential for a severance tax on natural gas development.

Many legislators in the General Assembly are introducing new legislation that would enact a severance tax on natural gas drilling in Pennsylvania, and with it, bring an end to desperately-needed shale gas revenues for environmental protection.

Different severance tax proposals are also being advanced by the candidates for governor.

Already there is a confusing flurry of words and numbers to support or challenge this legislation, dissect how the tax should be calculated, and decide how the monies should be spent.

What’s behind all this?  Big money.

For years Pennsylvania considered enacting a severance tax, but ultimately the county-by-county impact fee established by Act 13 of 2012 won out. Funds from those fees have reached $630 million and are used for a variety of critical programs. And while that number may seem large, it is dwarfed by potential revenues a severance tax would generate. Because Pennsylvania is facing a significant budget shortfall in the next year, policy makers of all stripes see the potential of a severance tax as a solution to their revenue problems.

The problem is that most of the discussion of severance tax focuses on spending the money significantly or solely on education at the expense of environmental protection.  And while quality education is a critical piece of ensuring Pennsylvania’s future, the proposals are being made to the immediate detriment of Pennsylvania’s environmental health and public resources.

The very legislation that authorized the imposition of impact fees includes a sunset provision for those fees the moment a severance tax is passed in Pennsylvania. That means critical support for state government oversight of the natural gas industry, as well as funding for an array of restoration and recreational programs – which deliver tangible economic and quality of life benefits to the people of Pennsylvania – will disappear overnight. It will also increase pressure to open up more state forest and park lands for natural gas development. This situation is unacceptable.

Any severance tax must dedicate a significant share of revenues to supporting state agencies charged with overseeing the natural gas industry, as well as for initiatives like combating enormous environmental legacy issues like abandoned mine drainage, watershed restoration, protecting key habitats, and restoring and enhancing our public lands and recreational amenities. Revenues from a severance tax should also expand and make permanent the standing executive order to prohibit any future development on state forest and park land.

Pennsylvania has a long history of both environmental devastation and renewal. The General Assembly and Governor should not abdicate their responsibility, or the opportunity presented by a severance tax, to restore our Commonwealth and to protect against future impacts to the resources owned and enjoyed by all Pennsylvanians.