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DN Editorial: No passing gas

Corbett's lost Pa. million$ in revenue. A new guv could change that.

IMAGINE IF someone discovered gold in your backyard and offered you $50,000 a year for the right to mine it. Would you take the deal?

It might be tempting, but it would be foolish to agree.

While the fee would be fixed, suppose the mine began to yield $5 million a year of the precious metal, year in and year out. Your share would be a fraction of the total value - a measly 1 percent.

That's exactly the case in Pennsylvania when it comes to natural gas.

In this state, unlike most others, we do not have a tax based on the amount of gas extracted. Instead, we have an "impact fee" equal to about $50,000 a year for each well drilled.

We have a fee because of Gov. Corbett's phobia against taxes. He has resisted all attempts to enact a tax on the gas.

First enacted in 2012, the fee brings in $200 million a year, with 60 percent of the money directed to the half-dozen counties that have the most gas wells in their midst. The other 40 percent is directed to other counties across the state, including Philadelphia.

Now comes an impartial study that says the money collected by that fee is meager when compared to the potential revenue yield for the state.

The Independent Fiscal Office, a bipartisan agency created by the Legislature, said that the money Pennsylvania gets from its drilling industry is the lowest of 11 natural-gas producing states that were studied.

The IFO said the state's current impact fee equals about one percent of the value of the gas extracted from these Marcellus Shale gas wells.

The revenue is much higher in other states, even in Texas and Oklahoma, which are known to be friendly to oil and gas interests. All of them levy taxes on the volume of gas extracted.

When drilling first began in Pennsylvania no one was sure how much gas it would yield. Now we have an answer: a huge amount. Some experts have taken to calling Pennsylvania the Saudi Arabia of natural gas. In 2008, researchers estimated that the volume of gas from the Marcellus Shale could supply the entire country for about two years; they put the value of the wellheads at about $1 trillion.

This bonanza won't last forever. Gas production will eventually decline. We should move quickly to capture the value we can as soon as we can.

It is unlikely, as long as he is governor, that Corbett will ever approve an extraction tax. But, we are encouraged by the willingness of the Democratic candidates for governor to embrace the idea of a tax.

And we are encouraged by the bill that state Sen. Vincent Hughes plans to introduce to impose a 5 percent tax on gas extracted from wells, legislation that he said would yield up to $400 million in new revenue this year.

In the current political climate in Harrisburg, the Hughes bill is unlikely to move far this year. But, with the possibility of a new governor and a new Legislature in 2015, the time will be ripe for Pennsylvania to decide that when it comes to natural gas, we shouldn't settle for chump change.