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Rendell to revive gas-drilling tax plan

HARRISBURG - Gov. Rendell says the higher-than-expected bids at the state auction of gas-drilling leases this week, along with the fact that Exxon Mobil Corp. paid billions for a drilling company active in Pennsylvania, are evidence the industry can withstand a new tax this year.

Rendell, who dropped his proposal to tax natural gas extracted from the Marcellus Shale amid difficult budget negotiations last year, yesterday reiterated his plan to revive the tax as part of his annual budget address Feb. 9.

He also said he would begin meeting with industry leaders next week to establish a fair tax rate as the state heads into another revenue-challenged budget year.

"The tax is appropriate, it's necessary, and it's a big help going forward," Rendell said at a news conference yesterday.

He first made the gas-tax proposal a year ago and campaigned for it - until meeting with industry leaders, who convinced him that it was too soon to tax companies that were investing millions to open up a new, and extremely promising, arena of deep-well drilling in Pennsylvania.

On Tuesday, the state offered leasing rights to 32,000 acres of state forest land, generating $128.5 million - twice the projected revenue - roughly half of which would go toward next year's state budget.

In December, Exxon Mobil said it would pay $41 billion for XTO Energy Inc., a company that has staked out ground in the natural-gas-rich Marcellus Shale. Exxon Mobil's entry suggests that more capital will flow into gas development in Pennsylvania, where drilling is traditionally dominated by smaller firms.

Another indication of the gas industry's health, Rendell said, is the tripling of permits for gas-well drilling that are expected to be sought this year.

He said industry officials reported that 5,200 such permits were expected in 2010, triple the number now allowed.

Rendell's proposal to tax the gas is all but certain to engender a fight from Republicans in the legislature - though some suggest they would be willing to discuss the idea.

A spokesman for Sen. Mary Jo White (D., Venango), chairwoman of the Environmental Energy and Resources Committee, said she supported the governor's commitment to funnel gas revenue into the general fund, rather than into special-projects accounts. But the spokesman, Patrick Henderson, said White didn't want drilling companies overburdened by a so-called extraction tax while also paying various other taxes.

"The senator never said she opposed," he said. "She wants to know the time is right, and she can't say she's convinced now is the time."

House Republican leaders say they will oppose the tax, as they have all other tax proposals from Rendell and the majority Democrats.

"We do not support tax increases we don't believe they are necessary," said Steve Miskin, spokesman for House Minority Leader Sam Smith (R., Jefferson). "Pennsylvania takes in enough revenues to pay for its real needs. What you have to do is control spending."

 


Contact staff writer Amy Worden at 717-783-2584 or aworden@phillynews.com.

 

Amy Worden Inquirer Harrisburg Bureau
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