Rendell Drops Marcellus Drilling Tax Proposal

Pennsylvania Governor Rendell is giving up on one the central requests of his February budget address. For months, Governor Rendell, Democrats and environmental advocates have been pushing for a five-percent severance tax on natural gas wellheads in Pennsylvania’s Marcellus Shale formation. The proposal would have also put a 4.7 cent levy on every thousand cubic feet of extracted gas.
Now Rendell says that tax isn’t going to happen.

"I think we all agree, Republicans and Democrats alike, that eventually we should have a severance tax, but not at the beginning of the development of this, number one. And number two, we want to work with the people investing significant amounts of money in Pennsylvania, to make sure that they get off the ground and things get running, and that we get their input."

Stephen Rhoads, the president of the Pennsylvania Oil and Gas Association, says he’s surprised, but happy, to hear the governor give up his push for a severance tax.

"It just makes sense, given the nature of the industry at this time, the early stage of development and the uncertainty of it, that this proposal is not going to do anything at all to fill a budget deficit."

Rendell’s announcement has environmental lobbyists upset. Erika Staaf of PennEnvironment is disappointed to learn Rendell is giving up the fight for a severance tax.
She calls it a “missed opportunity.”

"We were hoping to see this tax imposed to really protect our open spaces and our public and private lands from the affects of gas drilling."

Rendell and House Democrats appear to be split on the issue--a spokeswoman for House Appropriations Chair Dwight Evans insists the severance tax "is not off the table." The measure would direct six of every ten taxed dollars to the General Fund. Fifteen percent of revenue would go to the commonwealth’s Environmental Stewardship Fund. Rendell had estimated a severance tax would bring in 107 million dollars this year.