POLS ON THE STREET: Shale Severance Tax Breaks New Ground

BY JOE SHAHEELI
No one knows what the final outcome of the Pennsylvania budget saga will be. The House of Representatives has not agreed to the Senate’s latest funding proposal – or indeed on any proposal of its own.

But something tends to beat nothing. In the end, we predict the House will find a few Senate items to balk at and then go along with the rest.

The long-debated severance tax on Marcellus Shale natural gas is one item that likely will survive in the final package. Although Republicans fiercely resist any new taxes in principle, there is no easier way to find new recurring funds and the $1-billion shortfall is too big to ignore or paper over with finagles.

So Pennsylvania will finally join every other gas-producing state in adopting a severance tax on its finite natural-gas resource.

Energy donors will express their dismay to legislators they have funded for years. But they are unlikely to punish their largely Republican defenders on Capitol Hill. The $100 million tax proposed by the Senate could have been much worse., and industry lobbyists will still need their friends.

It was a major victory for Democrats, as well as for some Southeastern suburban Republicans, who have long been hungering for shale-gas revenue to support their own regional needs.

State Sen. Vincent Hughes (D-W. Phila.), as minority chair of the Senate Appropriations Committee, played a key role in negotiating the Senate plan. He was entitled to crow – which he did, with tact.

“We have broken new ground with the passage of this funding package because, for the first time in

Pennsylvania, a severance tax on Marcellus Shale natural-gas drilling has made significant movement in the legislature,” Hughes said. “Senate Democrats have been working to enact this tax for nearly a decade. It’s long past time for wealthy natural-gas drillers to pay their fair share for profiting off our natural resources. It’s a modest tax, but a tax nonetheless and it will help close the budget deficit without hurting taxpayers.

“This revenue package, though imperfect, represents a bipartisan compromise among four of the five key players in budget negotiations — the Senate Democrats and Republicans, House Democrats and the governor,” said Hughes. “It’s not what Senate Democrats would have crafted, but it does include important priorities that we support and that will help move Pennsylvania forward.”

President Jerry Jordan also hailed the severance tax, since he sees it as vital to support higher state K-12 funding in years to come.
“Our members have written thousands of letters, made calls, and participated in numerous rallies in support of this cause,” he said in a statement. “The modest tax in the revenue package is a recognition that the lucrative shale-drilling industry must finally pay their fair share.

“Funding for schools should be a central focus of any revenue package. And the Senate’s recognition that tax on the shale must be a part of that conversation is significant. and an historic step forward that lays the groundwork for future funding for the programs and services that our children deserve,” he continued.