No plan to offer gas extraction tax in budget package

06.30.14 | Bob Price

Proponents of a state severance tax on natural gas extraction may not be able to offer amendments to enact one because the General Assembly does not plan to bring up a budget companion bill that sets tax rates, legislative leaders said Monday.

Senate Majority Leader Dominic Pileggi, R-Delaware County, said the no-new-revenue agreement between Republican leaders and GOP Gov. Tom Corbett means there is no need for a so-called tax code because tax rates won't change. A House Republican spokesman offered the same explanation.

Lawmakers face a midnight constitutional deadline to approve a budget and the current agreement calls for spending $29.1 billion.

There's broad bipartisan support in both chambers for a severance tax, Senate Minority Leader Jay Costa, D-Forest Hills, said.

Republicans particularly in Southeastern Pennsylvania have supported a severance tax. Sen. Edwin Erickson, R-Delaware County sponsored legislation for a 4 percent tax.

Senate Democrats repeatedly have sought to tax drillers to raise hundreds of millions of dollars toward a $1.4 billion deficit, and to expand state programs.

“At this point they don't” plan to put a tax-change bill to a vote, Costa said. “You never say never. But, yes, we'd offer amendments on a shale tax to provide money for education and the environment. In our chamber, there's sufficient support to pass a (severance) tax.

“The House may be more problematic. But I think it could pass there with bipartisan support.”

Other “code” bills accompany the budget but Capitol insiders view the tax code bill as the best — and perhaps only appropriate — vehicle for a severance tax on natural gas.

The state must approve one companion bill, a so-called fiscal code, to spend money.

Corbett, a Shaler Republican, has opposed a severance tax since taking office in January 2011. He has said he wants the state to remain attractive to drilling companies to continue creating jobs. Pennsylvania competes with other states to attract the Marcellus shale industry, he says.

Moreover, natural gas companies paid more than $2 billion in taxes since 2008, Corbett's office says.

However, Budget Secretary Charles Zogby said recently the administration had not ruled out a severance tax — but that the governor first wanted the legislature to enact pension reform to reduce state costs. Pension reform bills remain stalled in the Republican-controlled House and Senate.

Jay Pagni, Corbett's spokesman, had no comment.

In 2012, Corbett signed an “impact fee,” a per-well levy of about 2 percent, which reimburses municipalities for drilling impacts and pays for state environmental programs. The rate varies depending on the price of natural gas.

Advocates of a severance tax want it levied on top of the impact fee.