Rendell, Senate GOP reach impasse in Shale tax talks

MARC LEVY and MARK SCOLFORO Associated Press Writers

HARRISBURG — This year’s prospects for a tax on natural gas production from the rich reserve beneath Pennsylvania dimmed considerably Tuesday after a meeting among state legislative leaders and Gov. Ed Rendell produced no sign of progress.

Democratic leaders and Senate Republicans blamed one other in dueling news conferences afterward at the state Capitol.

The lame duck Democratic governor said Senate GOP concerns about constitutionality problems with the gas-drilling tax bill that passed the state House two weeks ago were “a red herring” and “a bunch of bull.”

“Unfortunately, the effort to get this done has broken down,” Rendell said.

More talks were scheduled for today, but Senate President Joe Scarnati, R-Jefferson, said the sides remained far apart after an hour-long morning negotiating session.

“I don’t believe we’re any closer to a deal,” Scarnati said. “Certainly, the governor has laid out some different proposals. We continue to have the same concerns we’ve had in the past on tax rates and certain exemptions. Whether or not anybody moves further is, I think, yet to be seen.”

The Senate’s final scheduled voting session of the year is Thursday, although Senate Majority Leader Dominic Pileggi, R-Delaware, said he would call senators back to Harrisburg after this week if he feels there is sufficient justification for it. Senate leaders have ruled out returning after the Nov. 2 election.

Pennsylvania and West Virginia have seen thousands of wells drilled in recent years as the riches of the Marcellus Shale have become more accessible with a relatively new technique called fracking. Some geologists estimate the Marcellus, which also lies beneath New York and Ohio, contains more than 500 trillion cubic feet of natural gas.

With fracking, millions of gallons of water, mixed with chemicals and sand, are pumped at high pressure thousands of feet underground to create fissures in the rock and release the gas. The oil and gas industry says hydraulic fracturing is safe; environmentalists fear otherwise.

Pennsylvania is the largest natural-gas producing state that does not tax it.

On Tuesday, Scarnati said that gas-drilling safety issues had not been sufficiently addressed by Democrats, and warned that shallow-well producers could get taxed out of business under Democratic proposals.

The state budget that passed in early July included a written commitment by House Democratic and Senate Republican leaders to pass a shale tax and establish a nonpartisan legislative fiscal office by Oct. 1.

The House voted 104-94 Sept. 29 in favor of a bill that would set the natural gas tax rate at 39 cents per 1,000 cubic feet — a rate that could rise — and divide the revenue among the state general fund, environmental programs and local governments. That bill would generate more than $316 million in 2011-12, the first full year, and $578 million by 2014-15.