Bill to tax natural-gas extraction advances

HARRISBURG - The state House moved one step closer on Monday to imposing a tax on the extraction of natural gas from the lucrative Marcellus Shale reserve.

The Appropriations Committee, voting 18-15 along party lines, passed a much-anticipated bill that Democratic sponsors said would bring in hundreds of millions of dollars in needed revenue. The action clears the way for a floor vote as early as Tuesday; the measure could be considered by the Senate later this week.

But Senate Republican leader Dominic Pileggi of Delaware County said the bill in its current form stood no chance of passage in the GOP-controlled upper chamber.

"This legislation would not generate the support of the majority of members of the Senate," Pileggi said. At the same time, he left the door open for compromise on a tax bill, as he has in recent weeks.

Gov. Rendell at a news conference Monday said he supported the House bill and urged the Senate to "take a hard look at it."

"I think the tax rate is fair and the distribution is good," he said.

As part of budget negotiations in June, Rendell and legislative leaders agreed to approve a shale tax by Oct. 1.

Under the House proposal, natural gas extracted in Pennsylvania would be taxed at a rate of 39 cents per 1,000 cubic feet, or roughly 10 percent based on current gas prices, industry representatives say.

The majority of the revenue (60 percent) would go to the cash-strapped state general fund. Local governments would receive 16 percent of the revenues, and the rest would be distributed to various environmental programs.

The bill also would establish a "job-creation tax credit" allowing gas-drilling companies to claim up to $1,000 in tax relief for each job created.

House Republicans roundly condemned the proposal, calling the tax rate too high and the percentage of revenue for municipalities and environmental programs too low.

State Rep. Bill Adolph (R., Delaware), ranking House Republican on the Appropriations Committee, said he would like to see taxes phased in over several years in order to protect jobs and give gas companies the opportunity to recoup their capital investment.

"We need to give the gas companies an incentive to continue to drill," he said. Each new well costs companies about $4 million to build, according industry estimates.

The Marcellus Shale Coalition, which represents gas companies, derided the Democrat-backed proposal.

"Unfortunately, this massive, misguided, and unprecedented tax would drive critical capital investments and jobs to other energy-producing states and countries," said the coalition's president, Kathryn Klaber.

State Rep. Bryan Lentz (D., Delaware), a committee member, scoffed at this suggestion. "For the gas lobbyists to claim they will take their ball and go home is absolutely false," said Lentz, who is also a congressional candidate.

For his part, Pileggi criticized the proposed tax as the "highest in the nation" and said it did not meet the Senate Republicans' goal of "being competitive with other states." But the GOP leader said there might be a chance for accord on a natural-gas tax before the legislative session ends this fall.