Are Marecellus Drilling Tax Projections Too High?

Pennsylvania Governor Rendell says his proposed severance tax on Marcellus Shale drilling would bring in 107 million dollars next fiscal year. But some industry experts and lawmakers say that figure is faulty.
The governor wants to tax five percent of each wellhead’s value, as well as 4.7 cents per thousand cubic feet of natural gas removed from the ground. Stephen Rhoads, the president of the Pennsylvania Oil and Gas Association, argues the revenue Rendell says a tax would bring in over the next five years isn't reachable.

"It relies on a significant increase in the volume of gas production in Pennsylvania from current levels, which would require a major ramping up of the Marcellus Shale industry over the next five years, in a way we believe is unrealistic."

Rhoads recently told a legislative panel that gas extractions would need to increase by 735 percent to reach the administration’s expected revenue levels. He’s backing an alternative plan put forward by Indiana County Republican Dave Reed that would raise revenue by leasing out 390-thousand acres of state forest land for Shale drilling. Reed claims that approach would raise over 200 million dollars in its first year.