HARRISBURG, Pa. (AP) - Pennsylvania’s three biggest oil and gas associations, which represent multinational giants, are warning state lawmakers that raising taxes on the booming Marcellus Shale natural gas industry could have economic repercussions.
The letter, obtained Friday by The Associated Press, was signed by the heads of the Associated Petroleum Industries of Pennsylvania, Marcellus Shale Coalition and Pennsylvania Independent Oil & Gas Association.
In it, the trio said the enactment of a severance tax, like other major gas-producing states impose, could make Pennsylvania less competitive and drive the companies to shift crews and rigs to other states.
“The development of the industry is still far from complete,” the letter said. “Further expansive capital investment is needed and a severance tax could stunt the growth of this very promising industry.”
It said, for example, that the natural gas being found in Ohio and West Virginia is rich in liquids that can be processed into other fuels, making it more valuable than the “dry gas” found in much of Pennsylvania.
The letter was addressed to 11 top lawmakers in the Republican-controlled Legislature, including Speaker Sam Smith and Senate President Pro Tempore Joe Scarnati, both Jefferson County Republicans.
Lawmakers are discussing a severance tax to ease a massive budget shortfall that the governor’s office estimates has helped tear a $1.7 billion hole in Gov. Tom Corbett’s $29.4 billion budget proposal for the fiscal year that begins July 1.
Corbett, widely viewed as an industry ally, has staunchly opposed a severance tax and told reporters on Tuesday that he still dislikes the idea, even if he is not threatening to veto any budget legislation that includes it. His budget secretary, Charles Zogby, said Tuesday that the only idea that is not under consideration to deal with the shortfall is a broad-based income tax increase. A sales tax increase “may” be out of the running as well, he said.
Estimates for a 4 percent or 5 percent severance tax run into the hundreds of millions of dollars, making it one of the biggest ways that lawmakers have found to raise money. It is also popular in public opinion polls, although the oil and gas groups suggested that people who support a severance tax do not understand the complexity of the industry, market forces and competing opportunities.
“Simply saying, ‘the gas is here, where else are they going to?’ points to this fundamental lack of appreciation for the investment decisions our members make,” the letter said.