PA House Passes Severance Tax for Gas Extraction

From the Pennsylvania Budget and Policy Center (http://www.pennbpc.org):

 

On September 29, the Pennsylvania House voted 104-94 to enact a responsible severance tax on natural gas that ensures drillers pay their fair share.

 

Senate Bill 1155 (http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2009&sind=0&body=S&type=B&BN=1155, as amended by the House) would set a fixed tax rate of $0.39 per thousand cubic feet (MCF) of gas produced. Wells producing less than 60,000 cubic feet per day would be exempted from the tax. The plan does not include any front-end tax breaks.

 

The bill sets a tax rate that is comparable to severance taxes in many Western energy-producing states. Gas producers in many of those states pay property taxes on gas reserves and equipment, while oil and gas producers in Pennsylvania are completely exempt from property taxes. When considering both state and local taxes, the effective tax rate in the Pennsylvania proposal is lower than that in Montana, New Mexico and Wyoming.

 

According to a Fiscal Note (http://www.legis.state.pa.us/WU01/LI/BI/FN/2009/0/SB1155P2232.pdf) provided by the House Appropriations Committee, Senate Bill 1155 would generate $144.3 million in 2010-11 and $326.1 million in 2011-12.

 

Revenue Projections (SB 1155, PN 2232), Pa. House Appropriations Committee

 

2010-11 (effective January 2011)                                $144,290,000

2011-12                                                                   $326,113,000

2012-13                                                                   $408,776,000

2013-14                                                                   $495,809,000

2014-15                                                                   $587,544,000

 

The bill, as amended Tuesday, would distribute revenue from the severance tax as follows:

 

During Fiscal Years 2010-11, 2011-12 and 2012-13, the initial $75 million generated from the tax would be used as follows:

 

  • $70 million to the General Fund
  • $5 million to the Department of Labor and Industry for natural gas-related job training programs

The remaining revenue would be distributed as follows:

 

  • 40% to the General Fund
  • 32% to the Environmental Stewardship Fund
  • 16% to Local Governments
  • 2.4% to the Conservation District Fund
  • 1.6% to the Hazardous Sites Cleanup Fund
  • 1.6% to the Pennsylvania Game Commission
  • 1.6% for the Low Income Home Energy Assistance Program
  • 1.6% to the Oil and Gas Environmental Disaster Recovery Fund
  • 1.4% to the Fish and Boat Commission
  • 1% to the Environmental Hearing Board
  • 0.8% for state dam removal, restoration and repair projects
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