Taxation

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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…
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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?…
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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…
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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…
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    PA House Getting Ready to Cave on Severance Tax? Say it Ain’t So!

    It’s funny how mainstream media–and liberal Democrats–can turn on a dime. It was just a few days ago we read an AP story endlessly regurgitated across PA about how the PA budget fight had turned “ugly” and “personal” (see Pennsylvania’s ugly budget fight gets personal and regional). The story began this way: “The feel-good bipartisan spirit that Democratic Gov. Tom Wolf tried to instill last year in Pennsylvania’s Capitol is gone, stomped to bits in an increasingly ugly budget stalemate. Now, the Capitol seems gripped by a feud that is perhaps less partisan than it is regional and personal.” And now, a few days later, everyone is all-of-a-sudden happy and feeling better. It’s all bipartisan butterflies and unicorns popping up in Harrisburg. Why the change? Because now there are whispers that House Republicans may cave on adopting a Marcellus-killing severance tax. That has the antis, and the Dems (often one and the same) all giddy and feelin’ good. Is there any truth to the rumors?…
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    PIOGA Corrects PA Rep. Kate Harper’s Whoppers on Severance Tax

    Republicans hold majorities in both the Pennsylvania Senate and the Pennsylvania House. As is happening on the national level, the Republican Party in PA is also rife with establishment, left-leaning members who are not in their positions to benefit their constituents and all residents of the Keystone State, but are there to feather their own nests. Swamp dwellers. They are Republicans In Name Only (RINOs). One such RINO is PA Rep. Kate Harper, a “Republican” from Montgomery County–a Philadelphia suburb. Harper has been in the House since Jan. 2, 2001 (16 years, long past time she was voted out of office). Harper proposed an insane severance tax as part of this year’s budget deal. It’s not her first time at the trough. Harper has been proposing a severance tax for years (see PA RINO Rep. Kate Harper Trots Out Severance Tax, Again). Harper got her nose bent out of joint last week when her latest severance tax proposal, which she was just sure would make it this time, was removed from the budget bill during a committee vote. In responding to that removal, Harper made some inaccurate claims about the severance tax and the drilling industry. PIOGA (Pennsylvania Independent Oil & Gas Association) has stepped up to set the record straight on Ms. Harper’s whoppers…
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    PA House Holds the Line – Passes Budget with No Severance Tax

    Three cheers for Pennsylvania House Republicans. Hip hip, hooray! House Republicans did the near impossible–they held the line against a cockamamie plan to raise all sorts of taxes, including slapping a severance tax on the Marcellus gas industry (on top of the existing impact tax). You may recall our story about a group of hardworking Republican House members who, during the recent recess, did a masterful forensic accounting job of locating existing money sitting idle in a variety of programs and departments–money that can used to plug a deficit in the budget this year (see PA House Introduces Balanced Budget with NO Severance Tax). House members pulled a rabbit out of the hat by finding $2.4 billion in money laying around, unused in various accounts, that they plan to reallocate to the state budget. Yesterday the House voted. As always, battle plans never survive first contact with the enemy. The final version of the House budget plan passed yesterday includes a $1 billion loan from money the state is set to get in the future from the long-ago tobacco company settlement, an expansion of casino-style gambling, and “hundreds of millions” from the money House members found laying around, unused. The key is that there are no new taxes in the House budget plan. No severance tax. No gross receipts tax (on telephone, electricity and natural gas). Read my lips: No New Taxes. They did it! And they are to be applauded for it. Now the plan goes to the Senate where its future is less than certain. Gov. Wolf immediately blasted the House plan because it doesn’t include any new taxes…
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    Senators Try to Remove Sev. Tax Stain by Chiding Wolf re DRB Vote

    Following yesterday’s vote by the Delaware River Basin Commission (DRBC) to take the first step in a permanent ban on fracking in the Delaware River Basin (DRB), reaction from those who support drilling was swift. The American Petroleum Institute issued a statement saying, among other things, that the DRBC’s intention to permanently ban fracking in the DRB is “bad public policy.” More than a few Pennsylvania legislators took issue with PA Gov. Wolf’s vote to endorse a permanent frack ban. Three ranking State Senators–Senate President Pro Tempore Joe Scarnati, Senate Majority Leader Jake Corman, and Senate Environmental Resources and Energy Chair Gene Yaw, ripped into Wolf with a joint press release yesterday, saying they “strongly objected” to Wolf’s vote. The three said a permanent ban on natural gas drilling in the Delaware River Basin is “arbitrary, short-sighted and a blow to economic development, job-creation and landowner’s rights.” We appreciate their support. However, those same three Senators recently sold out the gas industry when they voted for a severance tax. They were part of the high-tax cabal that made the job of the House that much harder (thank God the House passed a no-severance-tax budget yesterday, see today’s companion story). While we appreciate the Senators’ support on the DRB frack ban issue, their bloviating against Wolf on the frack ban vote doesn’t remove the stain of their betrayal of the gas industry in voting for the severance tax. All three Senators need to go at the next primary…
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    PA House Ctte Votes to Rename “Impact Fee” to “Severance Tax”

    The Pennsylvania House Environmental Resources and Energy Committee amended a bill yesterday that will rename PA’s impact fee to a “severance tax,” a move which really ticked off the high taxers in the legislature, and anti-drillers (most of them one and the same). The PA House came back into session yesterday and 25 House members (most of them Democrats) made a move to get a vote on a bill with a 3.5% severance tax. The Republican majority on the committee flipped things around and replaced that measure with a vote to rename the impact fee–as a way of illustrating that the industry IS ALREADY TAXED, JUST LIKE A SEVERANCE TAX, even if you don’t call it one. So, let’s just call it one! Brilliant! Of course there are differences between a severance tax and an impact fee–actually the fee is a better revenue generator than a severance tax. However, the point remains: the industry is already paying a high tax, and to slap another on top of it is suicide. Republicans on the committee got their point across…
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    Philly RINO Proposes High-Tax PA Budget, Incl. a 3% Severance Tax

    We’ve written plenty about Philadelphia-area RINO (Republican In Name Only) State Rep. Gene DiGirolamo. In May DiGirolamo introduced yet another severance tax bill (see Tiresome: Philly RINO Rep Gene DiGirolamo Intros Severance Tax Again). Like a bad penny, Gene keeps turning up. Yesterday, without consulting Republican leadership (because, he said, they would have tried to talk him out of it), DiGirolamo introduced his own version of a plan to supply the missing funds to balance the state budget. Like all good Democrats, DiGirolamo’s plan is packed with tax increases, including (yes) a severance tax. Oh wait! He’s a Republican, not a Democrat. Or is he? In addition to slapping a 3% severance tax ON TOP OF the impact fee, DiGirolamo wants to raise the state income tax from 3.07% to 3.32%–a hefty 8.1% increase. Pennsylvanian’s won’t miss it, right? And besides, the teachers unions in Philly really want that money, bad…
    Read More “Philly RINO Proposes High-Tax PA Budget, Incl. a 3% Severance Tax”

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    PA House Introduces Balanced Budget with NO Severance Tax

    The Republicans in the Pennsylvania House of Representatives have done the hard work that PA Senate Republicans failed (or refused) to do: they have just introduced a budget bill that doesn’t raise a single tax, including no horrible severance tax–and yet they will balance a wildly overspent budget. How will they accomplish this feat of Houdini magic? By tapping into the bloated extra money budgeted but not spent by numerous state agencies. For example: mass transit, ports, rails and infrastructure accounts have a cumulative extra $507 million sitting in bank, unused. Why not reallocate it? Hazardous waste and industrial cleanups, agriculture, environmental, conservation and recycling programs have an extra $440.5 million laying around. Why not reallocate it? Etc. House Republicans, unlike their traitorous Senate counterparts, have “found” $2.4 billion in money laying around, unused in other accounts, that they plan to reallocate to the state budget. Genius! This is why House Speaker Mike Turzai should be PA’s next governor, not the inept Tom Wolf…
    Read More “PA House Introduces Balanced Budget with NO Severance Tax”

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    NEXUS Pipeline Tax Bonanza: $33M in Tax Rev for Single OH County

    Columbiana County, OH

    How often have you read that pipelines are “private companies” and solely created for “corporate greed”–not benefiting landowners all that much, and certainly not benefiting the communities through which they pass. All take, no give. We read those kinds of nonsense statements in so-called mainstream media all the time. False allegations. Fake news. Here’s some real news: One pipeline–the planned NEXUS Pipeline, a $2 billion, 255-mile interstate pipeline that will run from Ohio through Michigan and eventually to the Dawn Hub in Ontario, Canada–will generate ~$33 million in tax revenue over five years for a single county along its route–Columbiana County, OH. That’s tax money going to a local school district, multiple townships and other local government entities. How’s that for “this pipeline doesn’t benefit anyone but the company that owns it”? This story rips the facade off anti arguments that pipelines don’t benefit anyone but corporate greedsters…
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    PA Sen. Gene Yaw Defends Vote for Severance Tax

    PA Sen. Gene Yaw

    As MDN previously reported, in July the Pennsylvania Senate, which is controlled by Republicans, voted to enact a new severance tax on top of the existing impact fee (see Traitorous PA Senate Republicans Pass Severance Tax Bill). We named names in that article of those Republicans we consider to be traitors to the industry by voting for this insanity. One of those Senators is Gene Yaw, from Williamsport. Until now, we had not publicly read of how northeast PA Senators justify their vote for the severance tax. We now have. Sen. Yaw provided a statement to a local newspaper in Sayre with statements to explain his vote. Among his justifications: It was his “constitutional obligation” to vote for it, to “steady a sinking financial ship.” Yaw points out he voted for the original impact fee and that over time, revenue from that fee has trailed off, creating the need for a new revenue source (from the Marcellus industry) to replace it. The severance tax fits the bill for Yaw. Here is how Sen. Yaw justifies his vote…
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    Allegheny Institute: PA Impact Fee is Better than a Severance Tax

    The Allegheny Institute is out with another top notch policy brief. This one tackles the state’s existing impact fee and addresses the issue of why revenues from the impact fee have slid over the past several years. The Institute is not denigrating the impact fee, but lauding it as a better system of taxation than a severance tax. The Allegheny Institute exists to conduct research, education and advocacy work in a mission to defend taxpayers and businesses against burdensome taxation, inefficiency and intrusiveness of an ever expanding government–a pretty tall order because government at all levels is always expanding, like a voracious monster. Think of the Allegheny Institute as a mini version of the Heritage Foundation–focused specifically on Pennsylvania. The newest brief, titled “Shale Gas Impact Fee Revenue Continues to Slide” (full copy below) takes an honest, and hard look, at the impact fee. Researchers conclude that slapping a severance tax on top of the impact fee would be a disaster and violate the state’s commitment to drillers when they passed the impact fee…
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    Haynesville Shale Tops Marcellus Rig Count, 1st Time Since 2011

    The Haynesville Shale, found in East Texas and Louisiana, last week surpassed the Marcellus for total number of active drilling rigs. That’s the first time the Haynesville has had more active rigs than the Marcellus since 2011–six years. What’s up with the “sleepy” Haynesville? It’s not so sleepy anymore. Last year one of the biggest and best drillers in the Marcellus, Range Resources, paid $4.4 billion to buy out and take over a Louisiana driller (see Range Resources Buys Louisiana Driller in Deal Worth $4.4B). Range drills in the Terryville Field in Louisiana, which sits just over top of the Haynesville. This year Range is spending 34% of their capital expenditure budget on Louisiana drilling–money that could have been spent in the Pennsylvania Marcellus. Why is the Haynesville picking up again? (1) It costs less to drill in Louisiana because taxes and other drilling costs are lower, and (2) pipeline infrastructure is already in place to sell the gas into higher-paying markets. This is a very loud warning to those in PA who say “drillers won’t go anywhere else ’cause the gas is here” as a justification for slapping a severance tax on top of the impact fee on top of a corporate state income tax: THEY’RE ALREADY LEAVING PENNSYLVANIA, going to the Haynesville and other plays. How obtuse can you be? How stupid is it to RAISE taxes when drillers are already shifting away from the state? If PA lawmakers insist on slapping drillers with a severance tax, drillers will be happy to turn the spigots off for a while until prices go up and they can afford to pay the tax. Drillers are equally happy to spend their money drilling new wells in other states, given regulatory problems and high taxes. And then where will your “easy money” come from to balance an overspent state budget?…
    Read More “Haynesville Shale Tops Marcellus Rig Count, 1st Time Since 2011”

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    Shale’s Next Battle: Fair Treatment Under the Tax Code

    Politicians are once again demagoguing and attempting to demonize “Big Oil & Gas” over the taxation issue. No, we’re not talking about severance taxes. We’re talking about accounting deductions that oil and gas companies take to reflect depletion of assets. Flying under the banner of “eliminating tax loopholes,” some politicians want to strip away deductions from oil and gas companies–while leaving the same deductions in place for other industries. It is the worst kind of sleazy attack on the o&g industry. William Shughart, professor at Utah State University, brings us up to speed on the latest under-the-radar attack on the shale industry…
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