June 6, 2019
Governor Tom Wolf (PA) has long been a proponent of a new Pennsylvania severance tax on natural gas. In his Restore Pennsylvania initiative, the Governor seeks to eliminate many of the issues facing Pennsylvania today including eliminating blight in rural areas, preventing floods and fixing damage, fixing roads across the state, installing high-speed internet and more. The Governor’s proposed method of funding would be to impose a severance tax on the producers in the state. Currently, Pennsylvania has no severance tax. As you can see below, according to a 2017 study by the EIA Pennsylvania is the second-ranked producer in the United States.
Governor Wolf argues that every other oil and gas producing state has a severance tax, why shouldn’t Pennsylvania? But he runs the risk of discouraging drilling in a region that has been second to the Permian in recent memory. As Oil and Gas Journal notes, “The addition of a severance tax, especially at the high rate of 8.5% Wolf has proposed in the past, would discourage drilling at a precarious time and limit growth in gas production.”
Wolf’s new proposed “commonsense severance tax” would be volumetric and tiered according to the sales price, ranging from 9.1 cents per unit to 15.7 cents. He faces the stiffest opposition from the Republican-led House, with Speaker Mike Turzai being one of the most vocal in opposition.
Mr. Turzai called the new proposal “A $4.5 billion, debt-financed slush fund to be allocated at the whim of a new government board and paid for by yet another job-killing tax on the natural gas production industry.”