| OP-ED |
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| State Rep. Phyllis Mundy |
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Dec. 30, 2011
By State Rep. Phyllis Mundy
Four years have passed since the natural gas industry began Marcellus Shale exploration and drilling in our communities. Inexcusably, Pennsylvania has not yet enacted a severance tax.
The delay in enacting a Marcellus Shale severance tax has cost Pennsylvanians approximately $284 million. This revenue could have been used to improve local roads, bridges, water and sewer systems, and critical municipal services. It could also have supported flood control, the Growing Greener program, and our General Fund-supported operations of the Department of Environmental Protection.
Of the 783 oil and gas drilling companies to file Pa. Corporate Net Income tax returns in 2008, 85 percent paid nothing at all in taxes. One way they accomplished this is by using legal accounting schemes such as the so-called “Delaware Loophole.” Drilling companies are also exempt from property taxes on oil and gas reserves, and most drilling equipment is exempt from the state sales tax. In short, Pennsylvania has seen little revenue from these companies, most of which are from out of state, as are their employees.
The drilling industry is bringing some economic benefits to Pennsylvania and to some of our citizens. However, anyone who travels to Dimock in Susquehanna County as I have, or reads about the countless drilling accidents that have occurred across the state, knows that we are not being properly compensated for damage the industry has and will inflict on our communities.
When Democrats were in control of the House of Representatives during the 2009-10 legislative session, we passed a responsible severance tax proposal – S.B. 1155. This bill would have taxed natural gas extraction at a rate of 39 cents per 1,000 cubic feet and allocated revenue towards environmental protections and communities strained by Marcellus Shale drilling. This rate would have compared favorably with rates in other gas-producing states.
Senate Bill 1155 never left the Republican-controlled Senate.
I had hoped that the General Assembly and Gov. Corbett would negotiate a responsible “impact fee” agreement during this session. However, the two current Republican proposals, H.B. 1950 and S.B. 1100, would enact ridiculously low impact fees on Marcellus Shale drilling while stripping local governments of their already meager powers to regulate where the industry can drill.
These proposals are worse than no enactment of a tax at all if they restrict the ability of our municipalities to do what we at the state level have failed to do – to protect their citizens. I strongly believe that the revenue generated by their low effective tax rates – 1 percent and 2.2 percent, respectively -- is not worth the loss of freedom to municipalities that they entail. Worse yet, Luzerne County would receive no revenue under these bills because active Marcellus Shale drilling does not take place within our borders. Yes, even though our county is widely affected by the industry’s heavy truck traffic and the building of compressor stations and pipelines.
States like Texas and West Virginia have respective rates of 5.5 percent and 6 percent. Their state governments seized the opportunity to improve life for their citizens by enacting appropriate levels of taxation on the oil and gas industry. Corbett and the House and Senate majorities, however, are choosing to enrich a few at the expense of the many citizens who are relying on us to protect their interests.
A severance tax should have been passed four years ago. Even in the minority this year, House Democrats repeatedly tried to pass a severance tax. Our efforts were thwarted every time. The natural gas industry has a large, expensive impact on our Commonwealth. It’s past time they started paying for it.
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State Rep. Phyllis Mundy serves as Democratic chairman of the House Finance Committee. She represents the 120th Legislative District in Luzerne County.