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Friday, June 25, 2010

Advocacy group: Natural gas tax breaks hurt Pa.

With revenues down across the state, the legislature - with the support of Gov. Rendell - is considering a bill that will enact a severance tax on gas wells. Even the gas industry sees the writing on the wall: Pennsylvania will have a severance tax, and soon. But now, it's trying to blunt the impact of the tax, according to a report by The Pennsylvania Budget and Policy Center:

Long-time stripper well producers have gained traction for a tax exemption for low-producing wells. This exemption has been incorporated into every legislative and executive severance tax proposal since 2009. As currently defined, the exemption would include existing shallow wells and Marcellus Shale wells in their later years of production.

Now, the natural gas industry is seeking a tax exemption for the first three years of well production, citing tax policies in other shale gas-producing states, including Texas and Arkansas.

If the General Assembly adopts both proposed exemptions, only one-third of total gas production at a typical Marcellus Shale well would be subject to severance tax, and companies would pay tax for only nine years of the 40-year life of the well.

The report also cites studies showing that in other states, more tax breaks have not led to more wells being drilled, and the only thing that piling on the exemptions helps is gas companies' bottom line.

What do you think? How comprehensive should a severance tax be?

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Posted by Dave Merrell @ 7:13 AM  Permalink | Post a comment
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