Marcellus Shale - Gas Wells

October 28, 2010

Gov. Rendell reaffirms shale tax commitment

Governor signs new budget that calls for taxes on Marcellus Shale gas extraction to increase revenue.

By Steve Mocarsky smocarsky@timesleader.com
Staff Writer
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During a visit to the most active county for Marcellus Shale drilling this year, Gov. Ed Rendell on Tuesday outlined the state’s commitment to enacting a severance tax on natural gas extraction, saying such a levy should give a fair share to communities where drilling is taking place.

Rendell made his remarks as he signed Senate Bill 1042, the state’s fiscal code, in Towanda, Bradford County. The bill allows for transfers into the General Fund to balance the state’s fiscal year 2010-11 budget. The bill also contains language that affirms the commonwealth’s intent to enact a severance tax by Oct. 1.

“The rich natural gas deposits in the Marcellus Shale represent a tremendous opportunity in the form of new jobs and economic stimulus to mostly rural communities across the commonwealth,” Rendell said. “We have a responsibility to ensure that the economic benefits are balanced with the need to protect the local environment and the residents of communities where the work is being done.”

Rendell said local and county governments where drilling is taking place do not have the financial resources to handle increased demands the drilling industry puts on infrastructure, government and social services.

Acknowledging the intent of Rendell and members of the state Legislature to enact a severance tax later this year, Kathryn Klaber, executive director of the Marcellus Shale Coalition, said an “updated and modernized regulatory and legislative framework” must accompany “a fair tax strategy that keeps our state ahead of the curve in attracting the investment needed” for development in the Marcellus Shale.

Klaber said the coalition will work with the Rendell administration and the General Assembly “to put our state in the best possible position to seize on the extraordinary opportunities of the Marcellus.”

She said a severance tax cannot be imposed “in a vacuum,” and state lawmakers must also consider a “fair pooling statute” and write legislation that clarifies the authority of local and county government in regulating the oil and gas industry.

What the oil and gas industry calls “fair pooling” is also referred to as “forced pooling” – compelling landowners who don’t wish to lease their mineral rights to be part of a drilling unit with others that do.

The $28 billion state budget that Rendell signed Tuesday was part of a deal that would boost state borrowing by as much as $600 million to pay for construction projects such as new public buildings that would be named after U.S. Sen. Arlen Specter and the late U.S. Rep. John Murtha.

The planned increase in the state’s ceiling on a portion of its debt will be authorized by legislation that Rendell plans to sign today.

Rendell is hand-picking about half of the projects to be financed, while legislators expect to assemble a second list in the coming months that also must be authorized by legislation before they can receive money.

Rendell is earmarking $10 million for the Arlen Specter Library at Philadelphia University and another $10 million for the John P. Murtha Center for Public Policy at the University of Pittsburgh at Johnstown.

The Democratic governor also is setting aside $20 million for an “American Revolution Center” in Philadelphia and $30 million for a biologics manufacturing facility in Pittsburgh.

He defended the projects at a time when spending is being cut for a number of social services, including autism services, mental health services and county-based family crisis services, pointing out that the project money cannot be used to plug holes in the state budget.

“Capital money can be spent to make investments that create jobs, that create order for U.S. Steel, lumber, concrete, all of the manufacturing that is important to keeping our economy humming,” Rendell said. “It’s one of the ways that we’ve done so well over the years compared to other industrial states.”

Senate President Joe Scarnati, R-Jefferson, said he and other top Senate Republicans went along with the increase in borrowing because Rendell insisted on it as part of any budget deal.

Rendell signed the general appropriations bill at Elmwood Elementary in a Harrisburg suburb, which he said is symbolic of the extra emphasis he has placed on early education support.

Surrounded by schoolchildren in the cafeteria, Rendell touted his victory in sending an extra $250 million, or 4.5 percent, to public schools for K-12 instruction while lauding Elmwood’s improvement in test scores.

The increase for public schools comes during a year when Rendell and legislators sought to deal with a $1 billion-plus deficit. Legislators resisted Rendell’s call to impose new taxes on things like tobacco sales, and to eliminate a 1 percent incentive retailers get for collecting and submitting sales-tax money on time to the state.

He said he would have put even more money into education, but agreed to legislators’ desire to divert some money into programs they favor.

The Associated press contributed to the story.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

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