PA PUC Wants Act 13 Language Changed to Avoid Stripper Abuse
It seems the controversy in Pennsylvania over the Snyder Brothers’ strippers isn’t going to end any time soon. No, not those kinds of strippers, silly! We’re talking about stripper wells, which are defined in PA as wells that produce less than 90 thousand cubic feet (Mcf) for a one month period. Stripper wells are vertical wells that don’t produce nearly as much gas as horizontal shale wells. In 2012 PA passed the Act 13 law that includes a fee on wells targeting shale layers, including the Marcellus. And here’s where it gets a little complicated. Snyder Brothers drills mostly conventional (vertical only) wells. In 2011-2012 they drilled 45 vertical-only wells, but targeting the Marcellus (all of them fracked). Initially those wells produced more than 90 Mcf/month, but by December of the year they were drilled, they produced less than 90 Mcf. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/month for “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. The argument back and forth is whether the intent was “any single month” or not as the trigger to exempt a well from paying the fee. Snyder Brothers went to court and in March, they won, exempting those wells from impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). Now the PUC is (a) mad, and (b) worried that other drillers may use the court ruling to argue they don’t owe impact fees. So the PUC is doing two things: (1) The PUC appealed the lost case. (2) The PUC is asking Gov. Wolf, and the legislature, to “fix” the language in the original 2012 Act 13 law, to slant it in their favor…
Read More “PA PUC Wants Act 13 Language Changed to Avoid Stripper Abuse”
There’s some good news and, depending on your perspective, bad news when it comes to severance tax collections from natural gas (and coal) in West Virginia. According to West Virginia Department of Revenue in a report released last week, severance tax collections on oil, gas and coal in the Mountain State exceeded revenue projections by $13 million for the first nine months of the current 2017 fiscal year. The surplus reverses the trend from the previous year when WV lost severance tax money due to the drop in the price of oil and gas. Severance tax revenue, as we’ve pointed out before, floats up and down with the commodity price of oil and gas, unlike impact fee revenues which are much less tied to commodity prices (and one reason why PA drilling flourishes). So WV is seeing higher severance tax revenue–that’s the good news. The “bad” news is that Gov. Jim Justice and the WV Senate plan to cut the severance tax–putting the state back in the position of doing more with less…
Pennsylvania’s Independent Fiscal Office (IFO) provides revenue projections for use in the state budget process along with impartial and timely analysis of fiscal, economic and budgetary issues to assist Commonwealth residents and the General Assembly in their evaluation of policy decisions. It’s only been around since 2010 and in the past we’ve wondered if it’s populated with liberal Democrats that don’t hew to the state mission of being objective in their analysis. However, our confidence in the organization has grown over the past year or so. Recent IPO predictions about Marcellus Shale impact fee revenues have been pretty accurate (see 
On Monday Pennsylvania House Republicans released their version of a state budget, and yesterday (Tuesday) they voted to pass it. Ba-boom! The budget is noteworthy for many reasons. Of prime interest to MDN is that the budget does NOT include PA Gov. Tom Wolf’s insane 6.5% severance tax (see 
We find it kind of amusing. Anti-drillers and Democrats (usually one and the same) in Pennsylvania bellyache and moan and groan that PA is “the only oil and gas state without a severance tax” and how life would be SO much better if only PA had a severance…blah blah blah. They point out that Ohio has a severance tax. West Virginia has a severance tax. EVERYBODY has a severance tax. Of course they conveniently ignore (or lie about) the fact that PA has an impact fee, or an impact tax, if you will. The impact fee levies a charge on new wells for a number a years on a sliding scale. Think of the impact fee like a property tax, and a severance tax like a sales tax on goods sold. The beauty of the impact fee is that 60% of it stays in the communities where drilling actually happens. Impact fee revenue goes to local municipalities to offset the “impacts” of drilling in those communities, money used for things like fire departments, police, roads, etc. An impact fee is superior to a severance tax in many ways. While OH and WV’s severance tax revenue went over a cliff when the price of natural gas went over a cliff, PA’s impact fee was far less affected. But the point of this post is not in the relative merits in the type of taxation. The point is that legislators in Ohio want to reallocate some of their severance tax revenue to be used in communities where Utica drilling happens. That is, they want to convert some of the OH severance tax into, essentially, an impact fee. So while PA bellyaches about having an impact fee and not a severance tax, states (like OH) that actually have a severance tax, would rather have an impact fee!…
Last week MDN published a letter to the editor (Philadelphia Inquirer) from Dennis Davin, Secretary of the Pennsylvania Department of Community and Economic Development (DCED), supporting his boss’ desire for a new, very high Marcellus Shale severance tax (see 
Dennis Davin, Secretary of the Pennsylvania Department of Community and Economic Development (DCED), has been one of the loudest and most credible voices in the disastrous PA Gov. Tom Wolf Administration. Davin has done great work in promoting the Shell ethane cracker and the jobs/economic development it will bring to the state (see 
Statoil, based in Norway, is a big player in the West Virginia Marcellus Shale. Statoil paid property taxes to Brooke, Marshall, Ohio and Wetzel counties (all in WV) in 2015 and later found, during an audit/review, that they had overpaid those counties. They overpaid Brooke by $1.8 million, Ohio by $2.9 million, Wetzel by $1.6 million and Marshall by $342,000 (see 
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. That’s 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 on Pennsylvania. Last week the Institute published a new policy brief dealing with the latest severance tax proposal by PA Gov. Tom Wolf. This is a think piece–but not overly heavy. It is quite readable (within a few minutes) and delivers food for thought. As the author points out, you can change to a severance tax from an impact fee (i.e. tax), but will you really reap all of the revenue claimed? Politicians like Wolf often gloss over the economics. Currently, the impact fee is levied on drillers. A severance tax, if enacted, would (in many/most cases) be deducted as an expense from royalty checks, placing the burden for the tax on landowners–and lowering their income, which means less in the way of state income tax revenues. The severance tax proposed by Wolf, when considered honestly, is nothing short of a disaster…
As politicians and analysts begin to dig into one of the centerpieces of Pennsylvania Gov. Tom Wolf’s proposed 2017 budget–a 6.5% severance tax on Marcellus/Utica drilling–new details begin to emerge. Like this: Most lease contracts contain a provision that says any taxes paid, including severance taxes, are a post-production expense and deducted from landowner royalties. So if Wolf’s severance tax were to pass, the people paying it will be landowners. That’s $200 million or so coming out of farmers’ pockets. Wolf & co. knew that situation would not earn them any votes, so they include a provision in the budget disallowing severance taxes to be deducted from royalties. Overturning existing contracts is illegal and sure to be challenged in court, but if somehow that provision gets upheld and the tax passes, it’s easy to predict Marcellus drilling will mostly cease. Wolf’s proposed 6.5% severance tax would put the state at, or near the top of, all states in severance tax rates. Some of the biggest drillers in the state have recently leased acreage in other plays and have no problem with shutting down new drilling in the Marcellus, moving on to other plays where the economics make more sense. Let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions not being allowed, and win. Landowners then fund the severance tax out of their pockets (the drillers are the “bad guys” and Wolf says “don’t look at me”). Now let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions and lose. Drillers simply walk away from PA. Either way, the Wolf severance tax proposal is a hot, stinking mess…
Ohio Gov. John “severance tax” Kasich is Johnny One Note when it comes to his desire to tax the Utica Shale industry and transfer their hard-earned money away to other people who didn’t earn it. In January, Kasich announced he would obstinately include a nosebleed-high Utica Shale severance tax (6.5%) in his biennium budget–again (see 
Yesterday MDN brought you the disappointing news that Pennsylvania Gov. Tom Wolf, America’s most liberal governor, has once again introduced a 6.5% severance tax plan as part of his 2017 budget (see 
A group of RINO (Republican in Name Only) dinosaurs (i.e. RINOsaurs) have come out of retirement to lobby President Trump on the insane idea of a so-called “carbon tax.” Two of them were from the Ronald Reagan Administration–George Shultz and James Baker III. (As an aside, when Baker was Chief of Staff for Ronald Reagan, he was an arrogant ass–prancing around the West Wing. We can state this categorically from first-hand experience. MDN editor Jim Willis worked at the White House when Baker was there. Jim can also tell you Baker came from the Bush camp, which today we call the Washington establishment. There was a deep divide in the White House during the Reagan years between the “Bushies” who were establishment types, and true-conservative “Reaganites.” You know which camp Jim belonged to.) A carbon tax is nothing more than a way to slap a regressive tax on every citizen of the country–as if we aren’t already taxed enough. If you live in the great middle class of this country, you already pay close to 50% of your income in various federal, state, local, property, sales and other taxes. Add it up sometime–you’ll see we’re not exaggerating. A group of Republican “elder statesmen” (as fake news source CNN calls them) yesterday met with Team Trump at the White House to push this disastrous plan, calling it (be careful not to vomit), “conservative.” There’s nothing conservative about it…