WV Shale Industry Pushes Back Against Severance Tax Increase
What is it about teachers’ unions that makes them so greedy for other people’s money? We’ve told you, for years, about the quest by Pennsylvania’s teachers’ unions (most of them in the Philadelphia area) who want to raid the coffers of Marcellus drillers via a confiscatory severance tax slapped on top of an existing impact tax slapped on top of corporate income taxes. You can never have too many taxes in education-land. That’s the only way they get paid. In West Virginia it’s the same routine. WV already has a severance tax, a nosebleed-high severance tax of 5% (one of the highest in the country). And yet teachers want to increase it–so they can grab that money for moi (see WV Teachers Get Greedy, Want to Boost Already-High Severance Tax). Ever-vigilant, the shale industry is pushing back against the money-grabbers. At a recent “interim meeting” of the WV legislature, Anne Blakenship, executive director of the West Virginia Oil and Natural Gas Association (WVONGA), told legislators that the oil and gas industry is not asking for a reduction in the severance tax, but they ARE asking that the rate not go up. Phil Reale from the West Virginia Independent Oil and Gas Association (WV IOGA) said, “We certainly don’t want to be taxed more.” Let’s hope lawmakers were listening and not looking at their smart phones…
Read More “WV Shale Industry Pushes Back Against Severance Tax Increase”
We’ve written, forever, about the quest by Pennsylvania’s teacher’s unions (most of them in the Philadelphia area) who want to raid the coffers of Marcellus drillers via a confiscatory severance tax slapped on top of an existing impact tax slapped on top of corporate income taxes. You can never have too many taxes in education-land. That’s the only way they get paid. Neighboring states like Ohio and West Virginia already have a severance tax. It’s hard comparing apples to apples, but essentially PA drillers pay a bit more than OH drillers, but a whole lot less than WV drillers. The severance tax in OH is 1.25%. In WV the severance tax is a whopping 5%. And yet, amazingly, the teacher’s unions in WV are now clamoring to boost the severance tax even more! They want to boost the tax by 2.5% to 7.5%–which would kill the Marcellus/Utica industry in the state. It would be a death sentence. The West Virginia Oil and Natural Gas Association (WVONGA) is on the case, pushing back against this lunacy…
Ever hear of a PILOT? No, not the airplane kind. A PILOT is a “payment in lieu of taxes”–a common arrangement for electric generating plants. If such plants paid property taxes at full market value, the taxes would be so insanely high the plants would be uneconomical and therefore wouldn’t get built. So PILOTs are used instead. Such an agreement was recently reached between EmberClear and Harrison County, OH. In September 2016, MDN reported that EmberClear planned to fund and build a new $900 million electric generating plant in Harrison County (see 
The PA Independent Fiscal Office (IFO) does a pretty good job of guesstimating how much impact fee revenue will get generated in the coming year, based on permit and producing wells activity this year. How good? Last year the IFO predicted that impact fee (equivalent of a severance tax) revenue would be $222 million for 2017 (see 
There is nothing “bipartisan” about Tom Wolf, Governor of Pennsylvania. He’s a hard-left partisan all the way. Yet this year, for the first time since taking office, he signed a “bipartisan” budget on time–before the June 30 deadline. Wolf practically genuflected before the Republicans who control both the House and Senate in PA. This is the first budget Wolf has signed at all. The previous three annual budgets adopted during Wolf’s tenure were done so without his signature. So why did Wolf practically fall over himself to sign a budget that does NOT include a new severance tax, as he has requested each year since taking office? Simple: He’s running for reelection and wants to appear as if he’s actually governing. He’s attempting to smear a little lipstick on the pig of his awful tenure in office. Question is, will it work? Do people have the attention spans of gnats? Or will they remember the pain and suffering he inflicted by dragging out previous budgets for months? Pennsylvanians should understand that Wolf’s nicey-nice with the budget this year will completely evaporate next year (if he’s reelected). Back will be the hard-left partisan who lives under the lipstick…
Once again we’re talking about strippers. Uh, stripper *wells* that is. In 2012 Pennsylvania passed the Act 13 drilling law that includes an impact fee on wells targeting shale layers, including the Marcellus. Snyder Brothers, headquartered in PA, drills mostly conventional (vertical only) wells in southwestern PA. In 2011-2012 they drilled 45 vertical-only wells targeting the Marcellus. All 45 of the vertical-only wells were fracked. Initially those wells produced more than 90 thousand cubic feet per day (Mcf/day), but by December of the year in which they were drilled, the wells produced less than 90 Mcf/day. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/day during “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf/day, arguing the word “any” is not a get-out-tax-jail-free card. Snyder Bros. sued and after an appeal of the case, Snyder Bros. won the case in March 2017, exempting those wells from paying impact fees (see 
This year’s Pennsylvania budget deal is different from the previous three such annual budgets. One way it’s not different is that this year’s budget once again hits a new high–a massively bloated, morbidly obese $32.7 billion. Although the budget does not include any new taxes, it does increase spending in a number of areas, including “education” (i.e. teacher’s unions). Democrat Gov. Tom Wolf once again asked for a Marcellus-killing severance tax this year, but he didn’t really mean it. He knew he wouldn’t get one. So Wolf brokered a deal with House and Senate Republicans that leaves out a severance tax. In the previous three budgets Wolf demanded a severance tax and delayed adopting each budget by months, in an act of petulance and temper tantrum. Since this is an election year and Wolf is up for reelection, he decided to forgo the histrionics over a severance tax. So, we’ve dodged the tax bullet once again. However, if Wolf is reelected, expect him to double down and perhaps even shut down state government in order to get a severance tax. The tax battle will be super-nasty next year, you can count on it. Meanwhile, the Senate is due to pass the budget on Friday, and Wolf will sign it soon after…
Yesterday Democrat Gov. Tom Wolf spoke at a Harrisburg Regional Chamber of Commerce luncheon, where Wolf tried to fleece business owners and managers into thinking he’s on their side. (Nice try, but no cigar.) Wolf said he thinks the state will have an on-time budget this year, because he doesn’t plan to drag it out for months and months as he has in the past. Wolf did not mention the severance tax during his talk before the Chamber, but in discussions following his talk, Wolf “acknowledged…that he is unlikely to secure it [a severance tax] in his first term amid resistance by House Republican leaders.” This is huge! Wolf is admitting defeat, throwing in the towel–that he won’t get the tax, at least not this year. However, before we jump up and down to rejoice, know this: Wolf believes he’s going to win reelection, and then he intends to go after the severance tax again–with a vengeance. Which is why it’s so important that he not win a second term. But if he does win (perish the thought!), a Republican-controlled House remains our only firewall against a Marcellus-killing severance tax intended to raise billions for Philadelphia teachers’ unions…
No wonder the teachers in Philadelphia think that the money in drillers’ pockets actually belongs to them. Because in neighboring West Virginia, it does! At least some of the money. WV held its final public hearing (#21) as part of a statewide “listening tour” about how the state should fix (i.e. pay for) its insurance program for public employees. Most of the speakers at the 21 complain-fests were teachers. Their #1 preferred solution to “fixing” (paying for) better benefits is to boost the severance tax on natural gas higher than the current 5% (already one of the highest rates in the country). Such an increase would, of course, kill new drilling. And sooner or later previously drilled wells on which current severance tax revenues are based wind down, leaving teachers back at square one, with no extra money to pay for better insurance plans. Here’s more on the story of WV teachers looking to take money out of the pockets of a single industry, in order to grab other people’s hard-earn money for themselves…
