Shale Industry Outlines Case Against Latest PA Severance Tax Plan
As we reported earlier this week, Pennsylvania Gov. Tom Wolf, who has been lauded as the most liberal governor in America, once again pushed for a Marcellus-killing severance tax (see Broken Record: Wolf, Dems & RINOs Float 4% Severance Tax). Since Wolf stood flanked by two Republican and two Democrat lawmakers earlier this week in announcing a pair of new severance tax bills, mainstream media has continuously run the headline of a “bipartisan” effort. What they don’t tell you is that the two RINOs who stood with Wolf are just about the only ones who support this lunacy. As must happen with each renewed effort by Wolf to steal money from the industry to hand it over to teacher unions in Philadelphia (which IS the purpose of the severance tax, we are not engaging in hyperbole), the industry must launch a counter-offensive. The shale industry, in remaining vigilant, has published a number of comments and columns to set the record straight. We must tell the truth about Wolf’s proposed severance tax. Stepping up the plate to do so is the Marcellus Shale Coalition (MSC), the Pennsylvania Independent Oil & Gas Association (PIOGA), and the American Petroleum Institute of PA (API-PA). Here, in their own words, is the response to Wolf’s “four year bad idea”…
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Every year it’s the same thing from “America’s most liberal governor,” PA’s Gov. Tom Wolf: propose a severance tax on natural gas production, a tax in addition to the existing impact tax (which is already the equivalent of a severance tax), and demagogue the issue in hopes of shaming/pressuring/bullying Republicans into passing such a tax. When/if such a tax is passed, give every last dime of it to teachers unions in the Philadelphia area–the people who elected Wolf to office. That’s been Wolf’s modus operandi since he assumed office. And it has just happened again, for the fourth time. Wolf, along with two liberal Democrats and two Republicans in Name Only (RINOs, from the Philly area) gathered yesterday to announce new severance bills introduced in both the PA House and Senate that will slap a Marcellus-killing 4% tax on shale production, on top of the existing ~4% impact tax. Here we go again…
It appears Pennsylvania is not the only state in the Marcellus/Utica region facing pressure to kill the drilling industry with high severance taxes. West Virginia is now facing a fight of its own. WV already has the highest severance tax among the three M-U producing states. Ohio’s effective severance tax rate is 1.3%. Pennsylvania’s effective severance tax rate (called an impact fee, roughly the same thing), works out to be around 2.9%. WV’s severance tax is an already-high 5%–yet in WV (like PA) teacher’s unions are pressuring politicians to raise the severance tax. In WV they want a boost to a “modest” 7.5%. It would make WV the highest severance tax in the lower 48 if it went to 7.5%. WV is rattled following an extended teacher strike, looking to prevent a future strike. While we’ve not read of any specific new proposals (bills) to increase the severance tax, folks from the drilling industry are worried enough that a past president of IOGAWV penned the following editorial on the topic…
It’s always fun to talk about strippers here on MDN. Uh, stripper wells that is. Background: 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 
As predictable as spring dandelions (weeds that won’t give up), a Marcellus Shale severance tax is once again being pushed by leftists in Harrisburg who want to raise hundreds of millions of dollars to give it away to teachers unions in the Philadelphia area. The interesting twist is that this time the bill introduced in the PA Senate is not from a Philly Senator, but is being authored and introduced by northeast PA Democrat Sen. John Yudichak–from Luzerne County (Wilkes-Barre area). Apparently Yudichak has been nominated as Gov. Wolf’s patsy, to do Wolf’s bidding and dirty work this time around. On Monday Yudichak issued a “co-sponsorship memo” to elicit names he can list on the bill when it’s formally introduced. No doubt he’ll get at least a few sell-out Republicans, like RINOs from the Philly area, and perhaps even some Republicans from drilling areas, like Sen. Gene Yaw from Williamsport, who voted for a similar bill last year…
The gloves have finally come off. Typically the Marcellus industry, as represented by the Marcellus Shale Coalition, has used restrained language when talking about Pennsylvania Gov. Tom Wolf. Hey, the industry has to work with the guy because the state Dept. of Environmental Protection (DEP)–the agency that regulates shale drilling–is part of the executive branch (under Wolf’s thumb). The industry often can’t say what it really thinks. No more. Wolf, who pretends to be a friend of the Marcellus industry and mouths words of support, recently launched a vicious, lying attack against the industry over the severance tax issue (as part of his re-election campaign). The gloves are now off and the MSC is punching back. MSC president Dave Spigelmyer published an editorial in today’s Philadelphia Inquirer pointing out the difference between Wolf’s words and his deeds. In a bout of political schizophrenia (some would say hypocrisy), Wolf says shale gas in PA represents “enormous economic opportunity.” He then turns around and claims high-paid Marcellus lobbyists have spread money around Harrisburg like candy, bribing legislators to block a severance tax. What Wolf doesn’t tell you is that he himself has received millions of dollars from the teacher’s unions he’s promised to give severance tax money to…
The Commonwealth Foundation is Pennsylvania’s premier free-market think tank. The aim of the Foundation is to “transform free-market ideas into public policies so all Pennsylvanians can flourish.” We’ve highlighted their excellent work over the years. They’ve just done it again. The Commonwealth Foundation has just published a report called “The State of Natural Gas in Pennsylvania” (full copy below). The opening begins this way: “Pennsylvania’s regulatory and tax environment is stunting job growth and deterring investment. A decade after the Marcellus Shale boom, lawmakers are still debating how to tax the industry instead of fixing the policies contributing to Pennsylvania’s increasingly uncompetitive energy market.” At the end of the report the Foundation shows a severance tax comparison of existing severance taxes in other states that PA competes against, like Ohio, West Virginia, Texas, Colorado, and Oklahoma. The chart shows that the existing impact fee (in essence a severance tax) runs around 1.1%. The severance tax in Ohio is running around 0.7%, and in West Virginia 3.5%. In places like Texas, which increasingly competes against PA with prodigious quantities of natural gas production, the severance tax is 4.2%. However, Gov. Wolf’s proposed severance tax would be 5%–the highest in the nation except for New Mexico’s 7.9% (which doesn’t compete with PA). The report shows how PA is restricting Marcellus activity with over-regulation and a high corporate income tax…
One of the lies told by Pennsylvania Gov. Tom Wolf in attempting to sell a Marcellus-killing severance tax to the general population is that most of the tax would fall on businesses and corporations outside of PA. The rallying cry has always been that PA landowners would not bear any of the severance tax–as in deductions from royalties paid. That lie was exposed by none other than the PA Independent Fiscal Office last week when the IFO released a report that calculates of the estimated $210 million in severance taxes that would be raised, per year, by the latest Wolf proposal–some $28 million of it (over 13%) would come out of the pockets of landowners–IN THE FIRST YEAR. By the third year, that number rockets to $51 million (or 24%). That is, a meaningfully large portion of the proposed severance tax WILL get passed on to landowners as deductions from their royalties. Lesson for landowners: Don’t fall for the siren song from Wolf and RINOs who say “If you support the severance tax (it won’t affect you), we’ll get you your minimum royalty bill.” It’s a farce…
What if a private company wanted to locate in a state, bringing with it 243,000 direct and spin-off jobs with an average salary of $93,000? And what if that company invested billions of dollars in the state economy? No doubt the state (and local municipalities) would offer up plenty of incentives to ensure they get the business. Pittsburgh and Philadelphia (and the State of Pennsylvania) are doing just that–offering up all sorts of incentives to attract Amazon to build its HQ2 project in the Keystone State–a project that promises a huge investment and thousands of employees. However, Amazon’s HQ2 will not employ 243,000 people and inject billions–not anywhere close. But there is an industry that is ALREADY doing exactly what we’ve outlined in the opening sentence. The Marcellus Shale industry has created 243,000 direct and indirect jobs (with an average salary of $93K per year) and has already pumped billions of dollars into the economy. And yet the State of PA and places like Pittsburgh and Philly are, in many ways, fighting against the industry! They don’t offer tax breaks, instead they offer new tax increases! What’s going on here? Why does PA treat Jeff Bezos and Amazon one way, and the Marcellus industry another? Why does PA pick “winners” and “losers” economically? That’s the important topic of a column we recently spotted by Lowman Henry, chairman and CEO of the Lincoln Institute…
Pennsylvania Gov. Tom Wolf’s Dept. of Environmental Protection (DEP), the agency charged with overseeing oil and gas drilling in the state, “blindsided” the shale industry last week with a proposal to hike the fee required when submitting an application to drill a new shale well (see 
As we reported last week, President Trump’s marvelous tax cut has had some unintended (negative) consequences for pipeline companies (see 
Here we go again. Supposedly striking a more “cooperative tone,” Pennsylvania Gov. Wolf’s sympathetic media buddies are trying to spin, as best they can, Wolf’s state budget proposal delivered yesterday. Wolf is a hyper-partisan who, in this latest budget, continues to demand a $250 million/year Marcellus-killing severance tax–on top of the existing impact tax. It is the only new tax in the budget, a budget that increases the already wildly overspent state budget by an additional $1 billion! Spending in Harrisburg is completely out of control–a disaster. The last governor (frankly the only governor in a generation) who tried to correct Harrisburg’s voracious appetite to spend more, Tom Corbett, got voted out of office after one term. Wolf is hoping to score a second term by continuing his Santa Claus routine–by pulling money from the pockets of those who earn it (landowners and drillers) to give away to those who don’t (teacher’s unions in Philadelphia). We are not exaggerating–this is fact. In his proposed $32.9 million budget, Wolf claims a “modest” severance tax will generate $248.7 million this year, and ALL OF IT will go to “education”–meaning teachers and their unions in the Philadelphia region. It’s political payback for their ongoing support and for their efforts to get Wolf elected in the first place. Why is this FACT not discussed openly in the media? It is repugnant to use the gun barrel of the state to steal the wealth of one group and transfer it to another as political patronage. Yet that is Wolf’s mission. Republican legislators reacted negatively to Wolf’s wildly overspent budget (and severance tax), as did the Marcellus industry…
President Trump’s marvelous tax cut has had some unintended (negative) consequences for pipeline companies. Trade groups and some states are pressuring the Federal Energy Regulatory Commission (FERC) to force pipeline companies to cut the rates they charge customers in light of the Trump tax cut. The corporate tax rate is going from 35% (highest of any modern/Western country) down to 21%. Which will encourage all sorts of investment in the good old US of A. When pipelines file rate cases for how much they will charge customers to flow gas (or oil or whatever else) through the pipeline, part of the calculation for what FERC allows them to charge is based on profitability. Since those companies will now be a whole lot more profitable (tax payments going down), the customers using those pipelines want the rates recalculated to reflect the savings. In other words, they want part of the tax savings too. But wait just a rootin’-tootin’ minute! (says the pipeline companies). The pipelines have duly signed contracts in place. You can’t just rework a single portion of those contracts with the sweep of a pen. What about other components in the contract that are used in calculating prices? In some (many?) cases pipeline companies have borne increased costs that are not passed along to customers. If the customers (mainly utility companies) want FERC to adjust the rates, they may not like how those rates get adjusted considering all the other factors that could/should be changed. Maybe they’ll go up instead of down! A battle is brewing between utilities and the pipelines that feed them, all because of Trump’s tax cut…
In early 2012, Pennsylvania enacted the most sweeping rework of oil and gas laws in the state in decades (see