Pennsylvanians could pay more under Wolf’s proposed severance tax plan

For the seventh straight year, Gov. Tom Wolf is proposing a new tax on the state’s natural gas producers — and ultimately on Pennsylvanians. This year’s severance tax plan, like the others before it, could undermine the production of natural gas — which about half of American households rely on for energy — and much-needed economic growth.

Wolf has billed his latest tax plan as a “commonsense” solution to the state’s sluggish economic recovery. But it’s really a tax-and-spend scheme that could harm Pennsylvania’s natural gas production and hit consumers with higher household energy costs. The natural gas industry already pays the impact fee, generating millions in revenue every year for the state, and any additional tax could prompt producers to cut back or look to invest capital elsewhere.

Because natural gas production boosts the broader economy and supports thousands of good-paying jobs in Pennsylvania, everyone would be impacted.

Here’s how:

• Economy and workforce could suffer

Pennsylvania is the nation’s No. 2 natural gas producer in the U.S., with the natural gas and oil industry supporting nearly 500,000 jobs in the state and providing ample, affordable energy to power our modern lives. Furthermore, the Keystone State is the third-largest net supplier of energy to other states, after Wyoming and Texas.

Industry production also pumps millions of dollars into the state and local economies each year, boosting small businesses and strengthening manufacturing.

Raising taxes on natural gas producers that already pay an additional tax — the impact fee — would increase operating costs and could reduce the industry’s investment in Pennsylvania, thereby derailing the state’s progress as an energy leader.

• State revenues could drop

In addition to paying millions in state and local taxes annually and fueling our economy, Pennsylvania’s natural gas producers have paid an impact fee on wells drilled.

In 2020, more than $200 million was collected from the impact fee. Since 2012, nearly $2 billion in impact fee revenue from natural gas drilling activity has gone to the state for distribution to communities for road and bridge repairs, water and sewer system upgrades, public safety projects and environmental programs, such as Growing Greener grants, according to Public Utility Commission data.

Any additional tax imposed on the industry could reduce investment and production, causing revenues to decline accordingly.

• Consumer costs could rise

Abundant natural gas has benefited households across America — and if Pennsylvania’s natural gas production decreased due to higher taxes and lower investment, it could have adverse impacts across the country.

For the last decade, the U.S. has been the No. 1 natural gas producer in the world. As a result, domestic natural gas prices have generally fallen since they peaked in 2008, and household energy expenditures dropped 15% over the past 10 years — even as spending on health care, education and food increased.

• Environmental progress could be impacted

The increased production of natural gas has also helped to lower U.S. carbon dioxide emissions. Due in large part to natural gas being used more widely in power generation, carbon dioxide emissions are at their lowest levels in a generation.

Furthermore, methane emissions rates decreased by nearly 70% from 2011 to 2018 in the largest producing U.S. regions, including Appalachia, even as combined production in those regions tripled. This progress is being advanced by The Environmental Partnership, a growing coalition of gas and oil companies of all sizes, including the nation’s major producers, focused on industry-led solutions to further reduce emissions and improve environmental performance. In December, the coalition announced an initiative to reduce the practice of flaring and methane emissions, share best practices and report data, demonstrating the industry’s commitment to climate-saving solutions.

• Energy security is at stake

Pennsylvania natural gas production has brought many benefits to the state and nation, including safeguarding our energy future. As the largest natural gas and oil producer in the world, the U.S. is now more self-reliant and safer. Imposing a severance tax on natural gas production could return us to the days of depending on foreign energy imports.

As the state rebuilds its economy, an additional energy tax would only inhibit investment, slow economic growth, potentially trigger increased costs for consumers and undermine our energy and environmental progress.

Author: Stephanie Catarino Wissman
Publication: TRIB LIVE
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