Natural gas tax bill criticized for skimpy aid to Shale area

MATT HUGHES

mhughes@timesleader.com

Most local lawmakers support a severance tax on natural gas drilling, but they differ on the tax bill passed by the state House of Representatives last week. Local legislators weighed in Monday with their opinions on the House bill.

Goldsworthy

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Rep. Phyllis Mundy, D-Kingston, supported the bill and said the tax will help recoup the cost to repair damages imposed on the environment and local municipalities by natural gas drilling.

“As a steward of the environment, I am pleased we were able to appropriate more funding from the extraction tax for local governments and the Environmental Stewardship Fund, rather than into the state’s General Fund,” Mundy said. “Given the drastic impact the drilling industry has had on local governments, this revenue will ensure our communities have adequate resources to improve and maintain their roads, bridges, water and sewer systems, and critical health and safety services.”

Rep. Eddie Day Pashinski, D-Wilkes-Barre, also voted for the tax. Pashinski said he hopes, as the Senate debates the bill, that it will not lower the proposed tax rate by much or water down funding for environmental protection and recovery.

“I welcome the industry,” Pashinski said, “but we need to have the right regulations in place to protect our environment and protect our water. That’s more important that the gas.”

Other area politicians supported a tax but disagreed with the version passed by the House, feeling the legislation kept too much of the revenue in Harrisburg.

The bill provides that in the first three years after enactment the first $70 million collected will be allocated to the general fund and the next $5 million to the Department of Labor for job training. After meeting those benchmarks, 32 percent of the remaining revenue would go to municipalities, 16 percent would be directed toward environmental concerns, and most of the rest would also go to the general fund.

Rep. Karen Boback, R-Harveys Lake, said she supports a tax on gas extraction, but voted against the House tax bill because more of the money the tax generates should be invested in counties and municipalities directly affected by gas drilling.

“An overwhelming majority of the revenue collected from this tax would go straight into the general fund, leaving the communities in the Marcellus Shale region wanting,” Boback said. “This legislation will not protect our local municipalities, which will take the brunt of the drilling impact.”

Boback also compared the tax to the state gaming tax, and added that “a tax on natural gas should be about protecting our drinking water and supporting the infrastructure in the Shale region, not about building the coffers to support the out-of-control spending in Harrisburg.”

Boback’s views on the tax are echoed by West Pittston Mayor Bill Goldsworthy, who is running against Mundy. Goldsworthy said he favors a severance tax, but thinks this attempt misses the mark.

Goldsworthy said the proposed 39 cents per 1,000 cubic meters, a roughly 10 percent tax, is too high, but that he is more concerned with the appropriation of tax money.

Goldsworthy called the breakdown “just ridiculous.”

“The gas tax money should be used for oversight and compliance initiatives on the gas production,” Goldsworthy said. “It should be used to make sure our water and environmental concerns are followed without exceptions. It should be used to help our residents, and especially our state, to become less dependent on foreign oil by investing in gas-powered state vehicles, trucks, and public transportation.”

Now that the tax has passed the House, it moves on to Senate debate this week. The version of the bill the Senate will consider is still being compiled in the House.

Sen. Ray Musto, D-Pittston Township, said he supports a severance tax, but “I’m not sure what the final product is going to look like. But I’m sure that it won’t be the same as what they’re looking at now.”

Musto authored another severance tax bill in line with Gov. Ed Rendell’s proposal of a 5 percent severance tax plus 4.7 cents per 1,000 cubic feet of gas.

Some of the changes the state lawmakers may be debating, Musto said, involve whether to allow drillers a capital recovery period, or a window in which taxes would be levied at a lower rate to allow drillers to recoup the initial cost of setting up a well. That would mean gas extracted in a well’s most productive years would escape taxation.

“If it’s a total giveaway, I’m not for it,” Musto said of the capital recovery period.

Sen. Lisa Baker, R-Lehman Township, called the passage of the severance tax “a good news/bad news situation.”

“The good news is that, by approving a bill, the House has provided momentum on the severance tax issue,” Baker said. “The bad news is that they chose a tax rate even higher than what the governor was pushing, which diminishes the prospects for investment, jobs and revenues.”

The Marcellus Shale Coalition, a natural gas industry advocacy group, blasted the severance tax in a press release sent shortly after the House bill’s passage.

Coalition President Kathryn Klaber called the tax “misguided and unprecedented,” and called votes for the tax “votes against job creation.”

The industry group is pressing for a lower tax rate and capital recovery period to be instilled in any severance tax.

On the other side of the debate, Michele Boice of the Gas Drilling Awareness Coalition said she supports the tax rate in the House bill, but opposes a capital recovery period and thinks more money should be set aside for local municipalities and environmental protection.

“The bulk of that money should be set aside to restore these communities and make them whole again,” Boice said, citing the state’s recent extension of public water to Dimock, which carried an $11.8 million price tag.

Gas Drilling Awareness Coalition founder Dr. Tom Jiunta said he opposes the tax as proposed because of the amount of money that it will put in the state’s coffers.

“I honestly think it should all go to municipalities and environmental protection,” Jiunta said. “Once your legislature gets addicted to that money, like we’re addicted to the fossil fuels, the cycle continues.”