Other Severance Tax Proposals Did Provide Funding For Environmental Restoration

Three other natural gas severance tax proposals announced in recent weeks by both Republicans and Democrats included funding environmental restoration programs, like Growing Greener, making the omission of environmental funding from Gov. Wolf’s proposal Wednesday all the more glaring.

Rep. Gene DiGirolamo (R-Bucks) February 4 held a press conference to discuss legislation to impose a drilling tax within the Marcellus Shale and distribute those proceeds to statewide initiatives.

In keeping with policies in other states with large natural gas reserves, Rep. DiGirolamo's proposal calls for a 3.2 percent drilling tax, while also keeping the impact fee created by Act 13 to help communities directly affected by drilling.

Revenue would be distributed to the following priorities: basic education, 40 percent; pension obligations, 35 percent; human services, 15 percent; and environmental programs, 10 percent--

-- Basic Education -- $226 million

-- Pensions -- $197 million

-- Human Services -- $85 million

-- Environmental programs -- $56 million

Rep. Kate Harper (R-Montgomery) announced December 18 she is introducing legislation to place a severance tax on natural gas drilling in the Commonwealth.

The tax rate would be competitive with nearby shale drilling states, and the revenue it generates would be directed to public school employee pension costs. The Public School Employees’ Retirement System currently has an unfunded liability that exceeds $32 billion.

“As this industry continues to grow, we have an opportunity to generate much-needed revenue to meet the ongoing economic challenges facing our state,” Rep. Harper said. “My proposal strikes the appropriate balance between keeping this job-creating industry competitive and capitalizing on the opportunity to protect our school taxpayers from skyrocketing pension costs.”

The tax would be in addition to impact fees assessed on drilling under Act 13 of 2012. Those fees are used to address infrastructure and other impacts in communities where drilling takes place, and to contribute to several statewide environmental programs. So far, the impact fee has generated more than $630 million.

“The impact fee has been very effective in meeting the needs of drilling communities and the Commonwealth’s environment overall, and my plan would not change one thing about the collection or distribution of these funds,” Rep. Harper said.

Rep. Harper’s proposal would assess a tax of 3.5 percent of the gross value of units severed at the wellhead. It is estimated the tax would generate more than $400 million annually.

Senators Art Haywood (D-Montgomery) and Vincent J. Hughes (D-Philadelphia) February 5 announced legislation to impose an 8 percent tax on Marcellus Shale gas along with the 1.9 percent impact fee.

Joined by Sen. Larry Farnese (D-Philadelphia), Haywood and Hughes said most of the revenue, which could reach nearly $2 billion a year within a few years, will go toward public education, the underfunded pension liability and environmental protection.

Sen. Hughes, Minority Chair of the Senate Appropriations Chairman, said the bill could generate more than $1 billion for next year’s budget.

From the revenue raised in the proposal:

— $100 million dollars would go to the Growing Greener Program;

— 60 percent of the money would go to fund Public Schools; and

— 40 percent would go towards reducing the unfunded pension liability.

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