Taxation

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    PA Frankenstein House Bill Merges Severance Tax & Minimum Royalty

    As predicted earlier this week, yesterday the Pennsylvania House Finance Committee voted to approve a 3.2% severance tax on top of the existing 5%+ impact tax (see RINOsaur DiGirolamo Says Vote on PA Severance Tax Coming Soon). Democrats and mainstream media are nearly orgasmic–this is as far as any severance tax bill has ever gotten in PA. The bill, House Bill (HB) 1401, now goes to the full House for a vote–maybe. It remains to be seen whether or not House Speaker Mike Turzai will allow a vote in the full House. There are procedural ways to tie up the bill. While it’s a crap shoot as to whether or not the full House would pass a Marcellus-killing severance tax, there is a section in HB 1401 that is sure to kill the bill–a guaranteed minimum royalty for landowners of 12.5%. Don’t get us wrong–we think the minimum royalty issue is very important and deserves a vote. PA Rep. Garth Everett has championed the issue, introducing a bill to accomplish that objective three times in the last six years (see PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time). No doubt HB 1401’s chief sponsor Gene DiGirolamo (RINOsaur from the Philadelphia area) is hoping to gain support from landowners for the severance tax by grafting on the minimum royalty provision–in the style of Dr. Frankenstein’s monster. Take a body part here (severance tax) and a body part there (guaranteed minimum royalty), sew it together (HB 1401) and shock it into life with a vote. Landowners should beware of this ruse. The minimum royalty issue needs to be addressed separately, on it’s own, and not part of a severance tax bill…
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    PA House Passes New Budget Bill w/No Sev. Tax, Wolf Demands Tax

    Yesterday the Pennsylvania House of Representatives passed House Bill (HB) 542 to try and finalize the three month plus late PA budget. This latest bill (see the summary below) uses mostly borrowing, against tobacco settlement money and small tax increases on online businesses and fireworks distributors to balance this year’s budget. The bill does NOT include a severance tax. Sounding like Johnny One-Note, PA Gov. Wolf immediately said any final deal must include a Marcellus-killing severance tax, or he won’t sign it. Some of the traitorous Republicans in the Senate still want to see a severance tax too (see Traitorous PA Senate Republicans Pass Severance Tax Bill). As we reported yesterday, RINOsaur Sen. Gene DiGirolamo believes a Senate committee will today report out his horrible 3.2% severance tax bill (see RINOsaur DiGirolamo Says Vote on PA Severance Tax Coming Soon). Talk of a 3.2% severance tax is false, because it would be added on top of the existing impact fee (i.e. tax) which is already the equivalent of a 5%+ severance tax. DiGirolamo’s bill, if passed, would vault PA into the position of having the highest effective tax on oil and gas in the country–killing any new Marcellus drilling in the state. Existing wells deplete over time, so in essence it would be a moderately slow death to the industry (and tax revenues from it)–dissipating to nothing in 5-10 years. Which is just fine for “Republicans” like DiGirolamo. At any rate, here’s the details on the House plan passed last night, with NO severance tax, and Johnny One-Note’s insistence on a tax…
    Read More “PA House Passes New Budget Bill w/No Sev. Tax, Wolf Demands Tax”

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    RINOsaur DiGirolamo Says Vote on PA Severance Tax Coming Soon

    RINOsaur /ri-no-sor/ (noun) – 1. a very old (fossil-worthy) Republican-In-Name-Only, someone who, if he were truly honest, would have registered as a Democrat decades ago. 2. so-called moderate Republican whom voters should have been put out to pasture decades ago. 3. Gene DiGirolamo. Pennsylvania State Rep. Gene DiGirolamo, a Republican-in-Name-Only (RINO) from the Philadelphia area, has been trying to punish the Marcellus industry in the state since 2011 when he first introduced legislation to impose a Marcellus-killing severance tax. And pretty much every year since then he has re-introduced a severance tax bill. Sometimes it’s for 3.2%. Other times 4.9% (see our DiGirolamo stories here). It appears DiGirolamo just plucks a number out the air at random and goes with it. He plucked another one in May, introducing House Bill (HB) 1401, which would slap a 3.2% severance tax on all shale gas production, on top of the existing impact tax (see Tiresome: Philly RINO Rep Gene DiGirolamo Intros Severance Tax Again). At a rally to support the new bill, DiGirolamo was the only Republican. All the rest were socialists or Democrats. You have to hand it to old Gene–he is determined. Yesterday DiGirolamo said he thinks he now has enough fellow RINOs who will support his severance tax bill to report it out of committee and to the House floor for a full vote…
    Read More “RINOsaur DiGirolamo Says Vote on PA Severance Tax Coming Soon”

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    Further Thoughts on PA’s Severance Tax “Mess”

    Dan Markind

    Last week MDN published an opposing viewpoint about the current severance tax debate in Pennsylvania (see Guest Post: An Opposing View of PA’s Severance Tax “Mess”). Please take time to read it. MDN editor Jim Willis has high respect for the author, Dan Markind (a partner with law firm Weir & Partners). When we published his post, we introduced it with our own thoughts. Dan had asked for the opportunity to respond to our intro, which we readily agreed to. Below is Dan’s response. We bring it with no further commentary necessary here, other than we like Dan and appreciate his views, even the ones we may not agree with…
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    PA Severance Tax Not Dead Yet, Industry Unites to Oppose

    Sadly, the severance tax issue in Pennsylvania is not yet dead, as we had hoped. Last week budget negotiations broke down and PA Gov. Wolf took matters into his own hands by borrowing $1.25 billion from the state’s Liquor Control Board to plug a gap in this year’s budget (see PA Gov Wolf “Acts” to Finalize the State Budget, No Severance Tax). However, it’s not enough money, and it’s temporary. So Wolf, the PA Democrat Party, and a variety of RINOs (Republicans in Name Only, i.e. swamp dwellers) continue to beat the drum for a severance tax this year. Yesterday Gov. Wolf went to Erie, PA to stump for “a reasonable severance tax.” He and others in his party still think it’s possible to get a tax passed this year. Next Monday the PA House Finance Committee (controlled by Republicans) will reconvene and hold a hearing on a plan to impose a 3.2% severance tax this year. The shale industry and their friends are holding a rally in Harrisburg on the same day, to make the point loud and clear that such a tax is a Marcellus-killer. Below is news about Wolf’s tax stump speech, the hearing next week, and details about the rally opposing the severance tax…
    Read More “PA Severance Tax Not Dead Yet, Industry Unites to Oppose”

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    Guest Post: An Opposing View of PA’s Severance Tax “Mess”

    Dan Markind

    You know how MDN feels about a new/extra severance tax in Pennsylvania–we’re dead set against it. We have been from the beginning. We think the impact fee (i.e. tax) is doing just fine, having raised over $1 billion in revenue from 2013 to 2017 (assuming the Independent Fiscal Office’s 2017 projections are accurate). The best part of the impact fee is that 60% of it stays local–in counties where drilling happens–instead of going to the black hole of Harrisburg overspending. However, there are Republicans in the state legislature addicted to spending, just like Democrats, and they continue to lobby for a new severance tax, to be placed on top of the existing impact fee. As we saw yesterday, PA’s rig count has been static to slightly down all year long (see Marcellus/Utica Rig Count Race Tightens: OH Count Closes in on PA). Does PA want to drive even more business out of the state and into neighboring Ohio and West Virginia? That, in our humble opinion, is exactly what a severance tax will do. Although, MDN doesn’t play favorites, we love all our state children equally! We don’t want PA to make a serious mistake. However, there are opposing opinions on the severance tax issue from people we respect. One of those people is Dan Markind, a partner with law firm Weir & Partners. Dan writes a regular email newsletter covering the Marcellus Shale in PA. Last week he wrote about the budget negotiation collapse and the (admitted) debacle of House Republicans clutching at alternative straws–first a warehouse tax and then a hotel tax–anything but a severance tax. Dan believes the shale industry in PA has alienated other industries, and has boxed itself into a corner by not accepting some form of a severance tax. We disagree with Dan’s view on this matter–but his view is shared by many. Which is why we bring you his email newsletter from last week (with his permission), to present an alternative view on the severance tax issue…
    Read More “Guest Post: An Opposing View of PA’s Severance Tax “Mess””

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    PA Gov Wolf “Acts” to Finalize the State Budget, No Severance Tax

    Attempting to bluster his way through an epic fail to get a budget agreement done, Pennsylvania Gov. Tom Wolf tried to lay the blame for a late budget on House Republicans, for their refusal to pass a severance tax. Yesterday Wolf unilaterally acted to plug a budget deficit (to fill the gap in a wildly overspent budget) by borrowing $1.25 billion from the state’s Liquor Control Board, from future liquor revenue payments. Playing politics, Wolf laid blame on Republicans in the House, saying he has “had enough of the games” and is “drawing a line in the sand.” Wolf’s willingness to act unilaterally by borrowing against future liquor revenues appeared to have stunned Republicans in the House, who rightly ask this question: If Wolf could have acted unilaterally like this to pull forward revenue and plug the gap, why didn’t he do it a month ago to prevent a downgrade in PA’s credit rating? That’s a great question. So who’s really playing politics with the people of PA? Wolf’s official statement belies his petulant, crybaby attitude in not getting his own way with a Marcellus-killing severance tax. Wolf held out hope that traitorous Republicans in the Senate could bully House Republicans into accepting a severance tax. Wolf lost that political gamble and he now must scramble to try and cover his political backside before the next election. Wolf’s base of far-left Philadelphia teachers won’t be happy. Wolf couldn’t get a severance tax passed in his first four years in office–so why expect he can in the next four? Wolf’s future as governor is now on life support–thanks to principled House Republicans who held the line and refused to cave to the pressure. So for now, the budget battle has ended. It’s over. Yes, a few more things need to get done, but the pressure is off. You might as well say the budget for this year is a done deal, WITHOUT a severance tax!…
    Read More “PA Gov Wolf “Acts” to Finalize the State Budget, No Severance Tax”

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    Latest PA Budget Bill Drops Fix for Slow DEP Permit Reviews

    In an issue that’s growing old, fast, the Pennsylvania legislature has still not dragged the dead horse known as the 2017 state budget across the finish line. It all started months ago when the Republican-led legislature passed a $32 billion budget–with only $30 billion available to pay for it. Big mistake. The pressure was intense to pass a severance tax to help fill the gap. Traitorous Republicans in the Senate caved to that pressure and in July passed a budget bill that hikes taxes on lots of things, including a severance tax (see Traitorous PA Senate Republicans Pass Severance Tax Bill). As part of that misguided and mangled budget bill, Senate Republicans slipped in fixes to the state Dept. of Environmental Protection’s chronic delays in issuing permits related to shale drilling (see PA Senate’s “Olive Branch” of “Relaxed Regulations” for Drillers). As we said at the time, the writing was already on the wall–Democrats would lobby to remove the DEP fix and leave the severance tax. The DEP fix (surprisingly) continued in further revisions to the budget plan–until yesterday, when the DEP fixes came out. Fortunately there is still no severance tax. However, Republicans have floated a plan to nearly double the tax on hotel/motel rooms. Such a tax would make Philadelphia’s hotel tax a staggering 21.25%, the highest in the nation! Gov. Tom Wolf is (so far) not commenting on the hotel tax idea–he still wants a severance tax and said so yesterday. So although a severance tax appears dead, and we think it’s 99% dead, it’s not yet 100% dead–so we need to remain vigilant in our efforts to kill it. And although the fixes to the DEP would be most welcomed, they won’t happen as part of the budget. There’s still some hope those fixes will happen apart from the budget bill. Here’s the latest word on PA budget negotiations…
    Read More “Latest PA Budget Bill Drops Fix for Slow DEP Permit Reviews”

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    PA State Budget Deal Close, with NO Severance Tax

    Yesterday afternoon Pennsylvania Senate Majority Leader Jake Corman told the media that talks on finishing the state budget are “closer than we’ve been in some time.” He also cautioned, “nothing is agreed to until everything is agreed to.” As for a severance tax, Corman said current discussions do not include a severance tax, which is interesting as Corman is one of the traitorous Republican Senators who voted for a severance tax back in July (see Traitorous PA Senate Republicans Pass Severance Tax Bill). Maybe he’s now seen the light? So how will the state raise more revenue to meet its voracious appetite to overspend? Basically from three sources: (1) truck stop slot machines and “mini” casinos; (2) borrowing against future tobacco settlement payments; and (3) new taxes on warehouses. We haven’t 100% dodged the severance tax bullet for this year, but we’d say we’re 99% sure there will be no severance tax as part of the final budget, which is very good news…
    Read More “PA State Budget Deal Close, with NO Severance Tax”

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    Sales Tax Revenue in OH Counties with Utica Shale Soars

    New research done by our friends at Energy in Depth has found that sales tax revenue generated by Ohio’s top eight Utica Shale counties–Belmont, Carroll, Columbiana, Guernsey, Harrison, Jefferson, Monroe and Noble–rose 45% from 2011 to 2016, while sales tax revenue in the state’s other 80 counties rose an average of 30%. That is, shale counties (collectively) brought in 15% more revenue into both county and state coffers than non-shale counties. Ohio levies a 6.75% sales tax on goods sold. Of that, 5.75% goes into the state budget (the black hole in Columbus), while 1% stays in the county budget. Conclusion: shale is helping to fund the entire state. That is, all state residents benefit from the shale industry in Ohio, in a very tangible way. Here’s the update from EID showing how shale counties are outperforming non-shale counties in the Buckeye State…
    Read More “Sales Tax Revenue in OH Counties with Utica Shale Soars”

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    PA Severance Tax Still Possible, but Not Likely – The Latest

    This is likely the “make or break” week that will tell us whether or not a Marcellus-killing severance tax will pass the Pennsylvania legislature. The PA budget is now close to 100 days late–at least the final bits of the budget. Republicans run both the PA Senate and House. They did the ultimate stupid thing by passing a spending plan of $32 billion with only about $30 billion available to pay for it. So over the past three months there has been intense pressure by Gov. Wolf (Democrat) and Philadelphia (even northeastern) RINOs (Republicans in Name Only) to pass a severance tax–on top of the existing impact fee. Wolf needs the severance tax because he promised the money to Philadelphia teacher’s unions–as payback for electing him. If he doesn’t get the tax, he stands of good chance of not being reelected. It’s always about politics. Lawmakers are back in Harrisburg today, in session, and the mainstream media “mood” indicates a deal will get done this week. Will a severance tax be part of it? We hope not! It is possible, but seems (to us) unlikely that the severance tax will get passed…
    Read More “PA Severance Tax Still Possible, but Not Likely – The Latest”

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    Anti on HuffPo Agrees w/MDN: Wolf Dangled $1M Carrot for Severance Tax

    Last week MDN told you about a visit by Pennsylvania Gov. Tom Wolf to Wyoming and Susquehanna counties in northeastern PA (see PA Gov. Wolf Visits NEPA to Barter for Marcellus Severance Tax). As we said at the time, the point Wolf was making on his visit to Tunkhannock is that $1 million promised to the village as part of the PIPE (Pipeline Investment Program) is being held up because the state budget is late. The budget is late because (according to Wolf) those dunderheads in the House won’t approve a severance tax. And if the hicks in Tunkhannock and elsewhere in rural NEPA would just pressure their House members to pass the severance tax, voila, that $1M check is in the mail. Sleazy. So imagine our surprise to read a column by a hardened anti-fossil fuelers in the Huffington Post–that essentially says the same thing. She even used our analogy–that Wolf is holding out a $1M carrot to elicit support for the severance tax. While you have to put up with the anti-drilling snark, the article/column is actually pretty good, giving a history of the PIPE program and its successes (which the author considers failures)…
    Read More “Anti on HuffPo Agrees w/MDN: Wolf Dangled $1M Carrot for Severance Tax”

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    Severance Tax Still Stalled – 3 Reasons It’s a Bad Idea

    The good news is that any number of severance tax proposals in Pennsylvania are still “stalled” and going nowhere fast. The bad news is that there still is not a finalized budget. Republicans have no one to blame but themselves. They passed an unbalanced, whopping $32 billion state budget plan months ago–without a way to pay for it all. Which has set up extreme pressure to adopt new taxes, including a severance tax and gross receipts tax. It appears that the GRT is dead, but the severance tax is not yet totally dead. Why? Because House Speaker Mike Turzai continues to hold the line–preventing a floor vote on the severance tax. Pin a medal on that man! Elect him as your next governor! He knows how to lead. However, since the severance tax is not totally dead (yet), we feel it’s necessary to keep talking about it. We’ve heard from some MDN readers who ask, “Why not adopt a small severance tax? It’s not all that bad, is it?” Yes! It is bad! And the Commonwealth Foundation (of PA) tells us why…
    Read More “Severance Tax Still Stalled – 3 Reasons It’s a Bad Idea”

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    Marcellus Industry Keeps a Close Eye On 3 Pending Bills in PA

    The Marcellus industry is closely watching three pieces of legislation sitting in the Pennsylvania legislature, bills that the industry fervently hopes do not pass. One of the bills is House Bill (HB) 557, introduced by Rep. Garth Everett, which would amend/fix the Oil and Gas Lease Act to ensure landowners get a minimum royalty of 12.5%, regardless of post-production deductions (see PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time). Another bill is HB 1624, which would slap a 6.5% severance tax on the drilling industry, with an allowance for drillers to deduct the current impact fee they already pay (the equivalent of a severance tax). So in essence, HB 1624 doubles or triples the existing severance tax (i.e. impact fee) to obscene new highs. The third bill is HB 542, the state budget bill for 2017 passed by the Senate (not the House), which would initiate a new 2% severance tax on top of the existing impact fee (see Traitorous PA Senate Republicans Pass Severance Tax Bill). Two of the three bills are unlikely to get passed during this session. The third is a toss-up. Which is which?…
    Read More “Marcellus Industry Keeps a Close Eye On 3 Pending Bills in PA”

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    PA Sending Wrong Message to O&G, Petrochemical, Manuf Industries

    Charlie Schliebs – Stone Pier Capital Advisors

    Over the years MDN editor Jim Willis has had the pleasure of meeting many great people–both in the shale industry and in other industries that overlap with shale energy. One such person is Charlie Schliebs, managing director of the Pittsburgh-based Stone Pier Capital Advisors. Charlie is a long-time MDN subscriber (and friend). He’s a money guy, having had a hand in a number of deals to finance Marcellus/Utica drilling. He’s also smart, and a mover-and-shaker–well-connected with many of Pennsylvania’s top business and political leaders. Recently Charlie composed an editorial to share with his clients and friends. The original intent was to write about the severance tax and the sellout by PA’s Republican Senate. However, the editorial grew to encompass the state’s treatment of the petrochemical and even construction industries. We asked Charlie for permission to bring you his editorial, and he graciously agreed. In it, he offers some insight into his original support for Tom Wolf during the last gubernatorial election, his profound disappointment with Wolf (be sure to read about the event Charlie hosted in which then-candidate Wolf participated and made an arrogant fool of himself), and how Wolf settled on a 5% severance tax plan, based on an off-hand remark by EQT. This is great stuff–real behind-the-scenes stuff only someone like Charlie can write about. Take time to read the whole editorial…
    Read More “PA Sending Wrong Message to O&G, Petrochemical, Manuf Industries”

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    PA Gov. Wolf Visits NEPA to Barter for Marcellus Severance Tax

    Hoping to pressure the Republican legislature to adopt a budget with a new severance tax, Pennsylvania Gov. Tom Wolf (Democrat) visited two towns in northeast PA yesterday that are in the heart of Marcellus Shale country. One of those towns is the bucolic village of Tunkhannock, in Wyoming County. MDN editor Jim Willis visited Tunkhannock a few months ago to attend an Atlantic Sunrise Pipeline rally (see Atlantic Sunrise Pipe Rally: ‘Time to Kick Politicians in the Ass’). During his visit yesterday, Wolf said there has been progress in the budget talks, but things are stalled at the moment. The big point Wolf made, the reason for the visit, is that $1 million of state money promised to Tunkhannock to run gas lines in the area for local utilities to tap into abundant, local Marcellus gas is on hold because of the budget impasse. Wolf was dangling a $1 million carrot, implying that if the local yokels want that money to run new gas lines, they dang well better support his plan to pass the budget–a plan that includes a severance tax on the Marcellus. That’s how we read it. From Tunkhannock, Wolf traveled north to Montrose, in Susquehanna County, where he visited the Endless Mountains Hospital–a hospital largely built with Marcellus money from Cabot Oil & Gas. If Wolf’s severance tax had been in place, that hospital would not have gotten built…
    Read More “PA Gov. Wolf Visits NEPA to Barter for Marcellus Severance Tax”