PA Lawmaker Introduces Severance Tax

Despite facing a major uphill battle, Democratic Pennsylvania State Senator John Yudichak of Luzerne County has moved a bill that would tax natural gas as it comes out of the ground. The bill calls for a tax on the gross value of the gas.

In the first three years of production, a well would be taxed at 2% and then jump up to 5% in year four. It would stay at that level until production fell below 150 MCF of natural gas per day. Once that threshold is reached, the tax would slip back to 2% as long as it stays above 60 MCF per day. Any well below 60 MCF would be exempt from the tax.

Yudichak says the tax would bring in $125 million in the first year and as much as $400 million a year after five years.

The measure is unlikely to win approval despite having Republican State Senator Edwin Erickson of Delaware County as a co-sponsor. Most Republicans in Harrisburg are against such a tax and the GOP holds a 30-20 majority in the PA senate. Yudichak says it is time to listen to the residents not the party, “The need to enact a natural gas severance tax is obvious to more than 60% of Pennsylvanians.” Yudichak was sighting recent polls that show public support for such a tax. “Gas drilling can potentially impact us all, in every corner of Pennsylvania,” says Yudichak.

Republicans have argued that such a tax will kill the young Marcellus Shale industry before it has a chance to grow. Yudichak disagrees, “We can have a thriving natural gas industry in Pennsylvania but it must be responsibly regulated and taxed to protect our communities, our land and our water.”

Even if it gets past the Republican controlled legislature, it would most likely face a veto from Governor Tom Corbett who made it a campaign pledge to not tax shale gas extraction. However, in recent weeks the governor and much of the rest of the party have begun to indicate that they may be willing to enact an impact fee that would stay with a host municipality.

In an effort to appeal to the Republicans, a third of the tax under Yudichak’s bill would be set aside for water supply and waste water issues, a third would go to an environmental stewardship fund and the rest would stay with local governments.