Monday, October 25, 2010

Rendell declares Pa. gas severance tax dead for 2010

Pennsylvania Gov. Edward G. Rendell (D) declared a natural gas severance tax officially dead for 2010 on Oct. 21, blaming Republicans in the state Senate for not offering what he considered a reasonable response to his request for a new proposal two days earlier.

Rendell asked Senate and House Democrats and Republicans in an Oct. 19 conference call for counterproposals to a compromise he outlined the previous week after the Democrat-controlled House passed a 39¢/thousand cubic feet levy on Sept. 29 which the Senate’s Republican majority immediately said would not be considered.

The governor proposed a severance tax in February of 5% of the gas’s value at the wellhead, plus 4.7¢/Mcf. On Oct. 11, he offered a compromise which would have called for a phased-in tax of 3% the first year, 4% in the second, and 5% in the third. Rendell said that he met several times with legislative leaders and gas producers as he developed the proposal. He said that when he received no reaction and saw that Senate Republicans did not intend to bring the House-approved bill up for debate, he made the conference call.

One day later, Senate GOP leaders responded with a letter which Rendell said restated their previous proposal for a 1.5% severance tax, with other provisions that the governor said provide giveaways to producers. House Republicans did not immediately respond, he added.

“It is irresponsible for Senate and House Republicans to refuse to compromise and simply turn their backs on these negotiations after days and weeks and months of work,” Rendell said on Oct. 21. “They signed a pledge to the people of Pennsylvania to enact a tax that requires drilling companies to pay their fair share for removing our state’s natural resources from the ground, and now they are walking away from that commitment.

“Their clear unwillingness to change their previous proposal or to resolve differences with the House Democrats and with my administration makes it obvious that they have killed the severance tax in this legislative session,” he continued. “It is a broken promise, as well as a misguided policy decision that will harm our environment, will leave our local governments without the financial wherewithal to deal with the impacts of drilling in their communities, and will increase the budget challenges that Pennsylvania will face in the years to come.”

Rendell, who is not running for re-election, noted that Pennsylvania’s general assembly has begun its election recess, adding that Senate Republicans have said they will allow no votes when the House returns for a lame duck session on Nov. 8. “With little time left to enact the severance tax, the Senate and House Republicans’ adamant refusal to advance a meaningful counter-proposal speaks volumes about their intentions,” he said. The tax’s prospects in 2011 are not particularly good since Attorney General Tom Corbett, a Republican who could succeed Rendell as governor, has said that he would not raise taxes if he’s elected.

Meanwhile, Kathryn Z. Klaber, president and executive director of the Marcellus Shale Coalition in Canonsburg, Pa., said that the organization and its members will continue to work with the state’s lawmakers and agencies to modernize Pennsylvania’s legislative and regulatory framework.

“As part of a well thought out and considerate comprehensive overhaul that includes legislative and regulatory modernizations, our industry maintains its support for a competitively structured severance tax that allows for capital recovery and reinvestment, comparable to other leading shale gas producing states, such as Arkansas, Texas, and Louisiana,” she said on Oct. 21.

“The leadership in the state senate deserves credit for their months of work in crafting a competitive, well-balanced package of reforms that would help ensure Pennsylvania remains a leader in responsible shale gas development,” Klaber added. “While our commitment to achieve these shared goals remains steadfast, we’re regretful that there wasn’t closure brought toward achieving these commonsense initiatives during this legislative session. We must get this historic opportunity right; we cannot afford not to.”


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