Last week, the Pennsylvania Budget and Policy Center (PBPC) released a report advocating for a severance tax on natural gas and other extracted natural resources. In response, three of the state’s leading natural gas organizations released a statement to shed light on the fundamental flaws and misleading information provided in the report.
For example, the PBPC report built its arguments on the assumption that natural gas prices are rising, despite the fact that prices are presently one-fourth of their summer 2008 high. Additionally, to produce the estimated amount of tax revenue in the report, over 6,800 new wells would need to be approved, drilled, and producing within the next five years. Only 500 wells are planned for 2009.
With regard to the report’s claim that taxpayers will have to pay the bill for damage to public roads from increased heavy truck traffic:
Roads and bridges are bonded and companies are legally liable to repair any damages caused by hauling heavy loads. The improvements come at no cost to the local taxpayer and often result in roads that are better than before drilling operations began.Agreeing that this is the wrong time for a severance tax on a budding industry, the release states that the industry will need support to meet the full potential as achieved in the comparable Barnett Shale region of Texas where drillers enjoy an 80% reduction in severance tax.