Opinion

OUR OPINION: DRILLING

October 28, 2010

Pa. natural gas tax makes sense

TAX, BABY, TAX.

A chorus of Pennsylvania residents should urge state lawmakers to do the economically – and environmentally – appropriate thing: tax natural gas drilling.

The natural gas industry is poised to profit substantially from the Keystone State’s chunk of the Marcellus Shale formation. Using new technology, the industry intends to yank fuel from the massive and previously untapped rock formation.

Drilling operations already dot rural landscapes in places such as Susquehanna County, and leases for drilling rights continue to be filed for potential projects in Luzerne County. WhitMar Exploration Co., a Denver-based firm, has leased about 17,500 acres in this county, with more to come, a spokesman said this week.

Capitalizing on lessons learned the hard way during the anthracite coal industry’s rise and crippling fall, Northeastern Pennsylvania lawmakers should lead the charge, if not the chant, for skillfully managing the state’s next energy boom. That includes adopting a natural gas severance tax.

“Pennsylvania is the only mineral-rich state that does not have a severance tax,” according to information supplied by the Harrisburg-based Pennsylvania Budget and Policy Center, a self-described advocate for working families.

It appears, based on experiences in Texas and Colorado, that the gas industry can benefit this state in certain ways, such as temporarily producing jobs in some areas. But it also can burden communities with costs that, barring a severance tax, might fall on residents.

For example, heavy trucks loaded with the water needed for drilling will punish rural roads and bridges. The industry also requires specialized water treatment facilities that are not yet commonly available here, and inspectors must be wary of its potential short- and long-term environmental impacts.

Likewise, the industry could spawn social costs such as artificially inflated home prices in places where the drillers operate for awhile, then move on. Similarly, might rural schools see rapid increases in enrollment, followed by quick declines?

The state House Environmental Resources and Energy Committee this week did approve a bill that would create a severance tax, with portions of the revenue to be returned to communities that bear the brunt of drilling. The bill wisely targets some of the projected tax revenue for “environmental stewardship” and also exempts certain lower-producing gas wells that probably don’t carry the same risks.

The measure deserves broad support from the Legislature as part of its ongoing budget negotiations.

Opponents of the tax have said it could dampen the industry, chasing drillers to other states where business is more profitable and delaying their entry into Pennsylvania. That seems unlikely. The industry’s sought-after resource is here, and drillers know they can save on transportation costs to East Coast markets.

Drilling will intensify in Pennsylvania as long as gas commodity prices stay within a favorable range. The only question is whether Northeastern Pennsylvania will partake in the bounty or be picked clean.

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