HANOVER TWP. — State Sen. John Yudichak, a known strong supporter of natural gas drilling in Pennsylvania, would like to see the industry pay a little bit more into state coffers.
Yudichak, D-Plymouth Township, said he is working out the details for a new bill that would impose a 5-percent severance tax on natural gas production. He said Pennsylvania lags far behind other states when it comes to taxing the industry.
“Every gas-producing state in the country has a severance tax,” Yudichak said at a news conference Thursday in the Northeastern Pennsylvania Industrial Resource Center (NEPIRC) building in Hanover Township.
Yudichak proposes the tax, in addition to an impact fee that natural gas producers in Pennsylvania already pay, could generate as much as $720 million in the first year.
A severance tax is a percentage of the gas’ value at the wellhead.
That money would be divided among state education and environmental departments, and also be used to provide tax relief on state corporations. Pennsylvania’s corporate taxes are the highest in the country, Yudichak said.
A formal bill is to be introduced in Harrisburg sometime in the next few weeks, he said.
The Marcellus Shale Coalition, a Pittsburgh-based association representing those in the industry, said the tax could impede growth.
Last week Yudichak was a keynote speaker at the coalition’s unveiling of the United Shale Advocates program, a massive gathering of industry types at the Mohegan Sun at Pocono Downs hotel.
In response to Yudichak’s announcement, the coalition issued a statement that would steer legislation away from new taxes on the industry.
“Shale development is dramatically bolstering our economy and nation’s security, and providing consumers with affordable, clean-burning energy,” one coalition spokesman said in an email. “More taxes would jeopardize these shared, broad-based benefits. Let’s avoid a race to the bottom and continue to get this generational opportunity right — now and for years to come.”
Yudichak criticized Republican Gov. Tom Corbett for his fear corporations will pull up stakes and move if taxed too much.
He said the administration has a “stay out of their way, and all good things will happen,” mentality that Yudichak believes is untrue.
“The governor is holding on to a false assertion,” Yudichak said, “that anyone that wants to levy a fair severance tax on Marcellus Shale is someone who opposes shale development.”
A call made to Corbett’s press office seeking comment was not returned Thursday.
However a Democratic candidate for governor, Tom Wolf, said he is in favor of making the industry pay its fair share and supports a 5-percent severance tax.
State Sen. John Blake, D-Archbald, was scheduled to speak at the news conference, but a spokesman said he was ill Thursday morning.
Yudichak is the minority chairman of the state Senate Environmental Resources and Energy Committee.
In a news release from Yudichak’s office, Blake said he believes state taxpayers are not being adequately compensated for the gas being taken from their land.
“The industry expected a severance tax and is certainly able to pay it, provided it is reasonably and responsibly levied in a manner that does not undermine the competitive position of the industry or the state,” Blake said.
“I believe (the Marcellus Shale industry) has the potential to transform our economy and put thousands of Pennsylvanians back to work,” Yudichak said. “However, in order to fully capitalize on the benefits of this industry we must have a comprehensive economic strategy in place. Today that is not the case.”
Of the proposed $720 million raised from the proposed 2014-2015 fiscal year’s severance tax revenue:
• $375 million would go to education;
• $195 million would be used to support jobs growth and the economy; and
• $150 million would be used to protect the state’s natural resources.
The severance tax would be in addition to the impact fees, which counties control independently, made possible through the Oil and Gas Act of 2012.
In data to be released this month, Yudichak said Pennsylvania just surpassed Louisiana in shale gas production, in second place behind only Texas. In 2012, the Energy Information Administration reports Pennsylvania produced 2.26 trillion cubic feet of gas. Texas produced about 7.5 trillion, and Louisiana produced about 3 trillion. Texas taxes producers 7.5 percent at the wellhead. Louisiana is at 3 percent.
Pennsylvania will not lose jobs by imposing a fair severance tax, rather, “we’re talking about a fair tax policy that lifts all ships,” Yudichak said.