POLICY UPDATES
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Introduction
Pennsylvania sits atop a Marcellus Shale deposit estimated to hold 363 trillion cubic feet of natural gas – enough to meet the entire nation's natural gas needs for at least 14 years. New technology and heightened demand for natural gas mean that drillers will extract this resource at an accelerating rate in the coming years and stand to realize significant profits.
While this valuable resource should be recovered responsibly, the extraction of this gas can impose heavy costs on our communities and environment – pipelines, drilling pads and wastewater storage pits altering our landscapes and fragmenting wildlife habitat, heavy rigs damaging our roads, billions of gallons of water taken from our streams and potential operational errors contaminating our land and drinking water.
Severance taxes in the United States
Thirty-nine states tax the extraction of natural gas or other fuels and minerals. (Most of the remaining states have little in the way of resources – e.g., Rhode Island and Connecticut.) Twenty states place at least three and as many as seven distinct severance taxes on resource extraction. States which use a severance tax enjoy major benefits:
- West Virginia will receive $335 million in severance taxes in 2009. According to WV Governor Manchin, WV’s natural gas severance tax (on the books since 1987) did not inhibit extraction. To the contrary, natural gas is being extracted at a record pace.
- Alaska derives almost 65% of its revenues from extraction taxes.
- Louisiana, New Mexico, North Dakota and Wyoming are enjoying budget surpluses, thanks to extraction taxes.
Severance taxes in Pennsylvania
Currently Pennsylvania does not tax the extraction of natural gas (or coal, oil and stone). The 2010-11 State budget includes language indicating the "intent" of House Democrats and Senate Republicans to pass a severance tax by October 1st, 2010. According to the budget text, these funds will be divided between the “Commonwealth, counties and municipalities, and environmental initiatives.” GreenSpace Alliance has joined with over 70 organizations in an effort to ensure that severance tax funds are used to:
- Repair some of the damage to our natural resources with water and land restoration and conservation projects supported by Pennsylvania’s Environmental Stewardship Fund. The Environmental Stewardship Fund, established in 1999, restores land and water damage from past coal, natural gas and other resource extraction in Pennsylvania.
- Help municipalities rebuild roads and bridges damaged by heavy drilling rigs.
- Help fill the state’s budget gap.
Doesn’t industry already pay its fair share?
Gas drillers claim that Pennsylvania shouldn’t adopt an extraction tax because they already pay the corporate net income tax. However, most states where they operate, including Texas and Oklahoma where many of them are based, have both. In West Virginia, oil and gas drillers pay a corporate net income tax, a 5% severance tax of gross receipts at the wellhead and 4.7 cents for every 1,000 cubic feet of gas produced.
State funding to conserve and restore Pennsylvania’s waterways, parks, forests and productive farms has evaporated.
These projects that invest in Pennsylvania’s future – that make Pennsylvania more attractive to businesses and more livable for residents – have borne cuts far more severe than other sectors of state government. Even as we place more burdens on our natural resources with accelerated drilling, government is disinvesting in PA’s green infrastructure:
- The Environmental Stewardship Fund, which repairs damage from past coal, natural gas and other resource extraction in Pennsylvania, has been shrunk this year alone by 40% ($29 million) due to the diversion of its funds to pay off debt for Growing Greener 2 bonds, and community projects have used nearly all the Growing Greener 2 bond money. (Growing Greener is the only state program where bonds aren’t paid off through the General Fund.)
Environmental Needs
An Environmental Stewardship Fund invigorated with a share of severance tax revenues could:
- Reclaim thousands of acres of abandoned mine lands and cap thousands of abandoned oil and gas wells, restoring these lands for full use by communities.
- Safeguard drinking water supplies and restore hundreds of miles of streams and fish habitat.
- Secure Pennsylvania’s food supply by protecting the productive agricultural soils of a thousand farms.
- Enhance health and wellness through investments in community park infrastructure – trails, ballfields, pools, picnic pavilions, etc.
- Protect green spaces that are special to communities.
- Improve Pennsylvania’s state park and forests so that Pennsylvanians and tourists can fully enjoy these treasures again.
- Make critical investments in water and sewer infrastructure via Pennvest.
Take Action and Find Out More
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