Reed: Governor's Move to Abandon Natural Gas Tax is Good News for PA Workers
Local lawmaker’s alternative to expand natural gas exploration on state lands still under consideration
Rep. Dave Reed (R-Indiana) today applauded Gov. Ed Rendell’s announcement at a capitol news conference this afternoon that the chief executive’s proposal for a new tax on natural gas in Pennsylvania is off the budget negotiating table.
“I think the governor finally realized that the economic consequences greatly outweighed any potential recurring revenue the state would have realized through his natural gas tax,” Reed said. “I applaud the governor’s decision to put the long-term interests of Pennsylvania workers ahead of the short-term interests of state government. Good-paying jobs for Pennsylvania families are much more important than a few more tax dollars.”
In February, Rendell outlined his annual budget proposal before a joint session of the House and Senate. The governor’s budget called for a new tax on Pennsylvania’s natural gas industry. While the governor viewed it as a way for state government to cash in on the emerging Marcellus Shale natural gas industry, opponents, including Reed, noted the new tax could potentially slow the industry’s development and jeopardize good-paying jobs for Pennsylvania workers. Natural gas industry experts predicted the governor’s tax proposal could cost the Commonwealth approximately 53,000 jobs during the next five years.
As the chairman of the House Republican Energy Task Force, Reed in March unveiled a counterproposal. Under Reed’s “Energize PA,” the state would benefit from increased natural gas exploration and harvesting on state forest land. The state, just like a private landowner, would enter into lease agreements with natural gas companies. Those leases would include upfront payments to the Commonwealth for exploration rights and also would call for the state to collect royalties on natural gas extracted from state forest lands.
“Instead of taxing the emerging Marcellus Shale natural gas industry out of business, we came up with an innovative, win-win approach,” Reed said. “Pennsylvania workers would benefit from the good-paying jobs Energize PA would produce. State government would earn some additional revenues to fill the budget deficit and our state would take a significant step toward energy independence.”
At his capitol news conference on Monday, Rendell said Reed’s proposal was still under consideration as part of any potential state budget agreement.
Under Energize PA, the state would lease 130,000 acres of state forest land to natural gas drilling companies in the upcoming year. Another 130,000 acres would be made available in each of the following two years for a total of 390,000 acres during the next three years.
The legislation would establish a minimum bid payment of $2,000 per acre. With 130,000 acres available per year, that would bring in approximately $260 million per year. That money would be split among the state, municipal governments and conservation districts.
Of the total amount, 80 percent – or approximately $208 million – would go toward filling the state’s projected $2.3 billion budget deficit. Local governments that host existing natural gas, oil or coal shallow well drilling sites would share 12.5 percent – or $32.5 million – of the money. Local governments that host new Marcellus Shale drilling operations would share 2.5 percent – or $6.5 million – of the money. Conservation districts across the state would share the remaining 5 percent – or $13 million – to pay for programs that protect the environment.
While the governor’s severance tax would have provided only $107 million in new recurring revenues for the state, Reed’s proposal would deliver nearly twice that amount – or $208 million – to help fill Pennsylvania’s budget deficit.
“This goes to show that new taxes are not the only or the best way to raise new revenues,” Reed said. “When we go beyond knee-jerk reactions, we can come up with innovative solutions. Instead of taxing an industry out of our state, we may be able to work with them to enhance job opportunities for Pennsylvania workers.”
Rep. Dave Reed
62nd District
Pennsylvania House of Representatives
(717) 705-7173
Contact: Dan Massing
House Republican Public Relations
(717) 772-9845