It’s easy to make a villain of the natural gas industry
The state’s Independent Fiscal Office, a nonpartisan office of the state Legislature, recently reported that Pennsylvania’s taxes on the natural gas drilling boom are among the lowest in the nation.
In its new report, the office noted that Pennsylvania is the only state in the nation with significant natural gas production that does not impose a severance tax based on the volume or market value of gas produced.
The report looked at 11 states and found that a Pennsylvania well that began producing in 2014 will be taxed at an effective tax rate of at most 1.6 percent. A similar well in West Virginia will be taxed at 7.2 percent, a Texas well at 4.6 percent, a Colorado well at about 5.6 percent and Ohio at 1.8 percent.
So that’s a lot of factual ammunition for detractors of the industry to use as evidence that it is getting too many breaks for its presence in Pennsylvania.
But the report doesn’t include corporate taxes. Pennsylvania has the highest corporate income tax rate among energy-producing states.
The report also doesn’t address the implications of a gas impact fee versus a severance tax. Would the local benefits be as great as they are now if Pennsylvania had a severance tax going directly to state budget coffers without provisions for distribution? We doubt it.
And the tax revenue belongs in the localities being heavily affected by the gas drilling boom, to be spent on infrastructure and the environment in those areas, not in areas not participating in the boom.
Would Pennsylvania be the second-largest producer of natural gas in the nation without a seemingly favorable tax profile for the industry? We doubt it.
And does Pennsylvania need a new source for high-paying jobs with the potential to create economic energy in countless ancillary businesses and industries? No one should doubt that.
It’s easy to point figures and create villains.
It’s much harder to look past knee-jerk conclusions to notice the long-term positive impact of the natural gas drilling industry.