Pennsylvania legislature is introducing two bills (SB725 and HB1585), which seek to add a severance tax to help capture some of the revenue that the Governor feels they are losing every year. Pennsylvania is one of the few large oil and gas producing states that does not have a severance tax.

This past week, two bills were introduced and are currently in the Senate Committee on Environmental Resources and Energy.  These Bills impose a volumetric natural gas severance tax.  The severance tax rate is based on a natural gas price with a sliding scale.  If the average annual price of natural gas for the calendar year immediately preceding the start of the imposition period is less than $3.00 the tax rate will be $0.091 per unit.  If the average annual price of natural gas for the calendar year immediately preceding the start of the imposition period is equal to or greater than $3.00 and less than $5.00 the tax rate shall be $0.109 per unit. If the average annual price of natural gas for the calendar year immediately preceding the start of the imposition period is equal to or greater than $5.00 and less than $6.00 the tax rate shall be $0.131 per unit. And, if the average annual price of natural gas for the calendar year immediately preceding the start of the imposition period is equal to or greater than $6.00 the tax rate shall be $0.157 per unit.

For the fiscal year 2019-2020 the imposition period shall be from January 1, 2020, to April 30, 2020. For the fiscal year 2020-2021 and each fiscal year thereafter the imposition period shall be from May 1 of the preceding fiscal year to April 30 of the current fiscal year.

It looks like there are going to be exemptions allowed. In the bill, the detailed exemptions allowed are natural gas severed, sold, and delivered by a producer at or within five miles of the producing site for the processing or manufacture of tangible personal property, lease use, natural gas severed from a storage field, and a stripper well. A Pennsylvania severance tax may be on its way, we will continue to monitor the bill’s progress.

Thank you to Nate Wolf of ConocoPhillips for the information