Rendell said after meeting with industry officials that he would agree to delay his push to impose a tax on natural gas extracted from the Marcellus Shale.
"It won't be in the mix this year," he said, adding that he would likely revive the proposal next year. "We felt we should let the industry get off to a good start, and that surpasses our need for money."
Rendell's move comes on the eve of the first scheduled meeting of the budget-crafting legislative conference committee in more than a month. It also comes three weeks after the governor abandoned his plan to temporarily raise the personal-income tax by 16 percent in a budget concession with Senate Republicans, who control the upper chamber.
For months, Rendell had lobbied for the tax on the gas-rich Marcellus Shale reserve. At one point, the administration estimated it could produce $100 million in revenue in the first year.
But the Democratic governor said yesterday that he reconsidered the idea after watching natural-gas prices plummet to near-record lows and meeting with industry representatives who have invested millions to explore the natural gas reserve hundreds of feet beneath the ground.
The Marcellus Shale is a vein of rock containing vast reserves, running hundreds of feet below ground from New York to Virginia. Its exploration and extraction - estimated to be worth billions - has been made possible in recent years by advances in technology.