Natural Gas Severance Tax Punishes Pennsylvanians

Sam Winstel
Posted February 18, 2020

Another year, another punitive natural gas tax proposal from Pennsylvania Gov. Tom Wolf, his sixth bid for a severance tax in six years.

We say “punitive,” because Wolf’s tax hike would effectively punish an industry that has been good for Pennsylvania, contributing $1.7 billion in impact fees since 2012 while boosting the commonwealth’s economy and supporting hundreds of thousands of jobs.

Responsible energy development has empowered local economies and revitalized the state’s manufacturing base, spurring strong growth in revenues, wages and land values. The Marcellus Shale helped Pennsylvania become the second largest natural gas-producing state, behind only Texas, and the construction of natural gas pipelines and processing plants is facilitating the industry’s ongoing expansion.

But duplicative, burdensome taxes undermine energy production and jeopardize future investments in natural gas operations. API-PA Executive Director Stephanie Catarino Wissman explained:

“Pennsylvania has led the way for the nation in natural gas production, and due to our energy leadership, the world has seen a monumental shift in the balance of energy power. This leadership is delivering for communities across the Commonwealth – by keeping utility bills down and bringing manufacturing jobs back, all while delivering savings and cleaner air to Pennsylvanians. This additional tax could discourage investments and risk the loss of revenues that have helped bolster communities and infrastructure in all 67 counties.”

Gov. Wolf’s “Restore Pennsylvania” promotes the misleading narrative that the natural gas and oil industry avoids paying its fair share, but rising state revenues prove otherwise. As energy operations have grown, so have contributions to counties and municipalities across the commonwealth.

Again, since 2012, Pennsylvania natural gas production has generated close to $1.7 billion in revenues from the state impact tax, according to data released by the Public Utility Commission. And per the Independent Fiscal Office estimates, the impact tax collected from the natural gas industry in 2019 will bring that total close to $2 billion. These revenues benefit the public good, through programs like the Unconventional Gas Well Fund, which supports conservation projects, infrastructure improvements and public safety initiatives.

Natural gas production – enabled by modern hydraulic fracturing and horizontal drilling – offers affordable, reliable and cleaner-burning energy to local families and remains fundamental to addressing the dual challenge of energy demand and environmental progress. Pennsylvania’s energy operators play a critical role in advancing U.S. leadership in both energy production and emissions reductions, and industry-led innovations are accelerating climate solutions.

For example, The Environmental Partnership – a coalition of 70 energy companies – is piloting programs to target methane emissions and improve the sustainability of operations. Since its launch, the Partnership has been implemented in 18 of 21 top-producing states, including Pennsylvania, where participants have conducted surveys across nearly 80,000 production sites and inspected millions of infrastructure components.

Per recently released data from the International Energy Agency, the U.S. saw the largest decline in carbon dioxide emissions in 2019 on a country basis – falling 2.9%. The emissions reductions are largely attributable to coal-to-natural gas switching in power generation, which is driven by the affordability of domestic natural gas. As innovative technologies are curbing methane emissions from production processes in Pennsylvania, the state’s natural gas resources are supporting progress toward climate solutions worldwide.

More than any nicely branded government campaign, the natural gas industry is restoring the economy, creating good-paying jobs and protecting the environment in Pennsylvania. Additional regulatory hurdles, like the proposed severance tax, could increase energy-related costs for families and minimize the benefits tied to the state’s energy abundance.