Harrisburg – In the last week, gubernatorial candidate Tom Corbett has launched two campaign ads that focus on Marcellus Shale drilling and the severance tax. The first, a radio ad, refers to the severance tax as “a huge extra tax on drillers” that will: “make it more difficult for companies to compete, kill jobs, and increase utility bills.” The second, a TV spot, calls a severance tax “a massive Pennsylvania energy tax that will kill jobs and drive up utility bills.” These statements paint a dire and inaccurate picture of the economic impacts of a severance tax. PennEnvironment, Conservation Voters of Pennsylvania, Clean Water Action and the Sierra Club ask Mr. Corbett to pull these ads off the air.
“These ads are pure and simple fear mongering without any facts,” said Myron Arnowitt, PA State Director, Clean Water Action. “The reality is that communities have had their drinking water contaminated by gas drilling. It’s only fair to ask these multinational oil and gas companies to pay to clean up the damage.”“A massive/huge extra tax”: Pennsylvania is the only major gas producing state that does not require gas drillers to pay for our natural resources. Montana charges an effective rate of 7.5% on gas drillers. New Mexico: 7.3%. Oklahoma: 6.7% The proposals for a PA severance tax fall into this same range. Pennsylvania is also the only state in which property taxes cannot be collected on drilling rights, lowering the Commonwealth’s overall tax rate for drillers. It’s not a huge tax, it’s a tax that’s in line with established practice throughout the country and one that drillers expect to pay. The Philadelphia Inquirer reports that a drilling executive from Dallas told Rep. Karen Beyer (R., Lehigh) that the industry is willing to pay a production tax. Beyer called Pennsylvania's lack of an extraction tax "an outrage."
“Drilling poses serious risks to Pennsylvanians and our environment. A severance tax will compensate communities and fund projects that repair environmental damage,” state Dennis Winters, Chair of Sierra Club’s Pennsylvania Chapter. “It is time the drillers pay their fair share in Pennsylvania. The public deserves to be told that the severance tax is a tax on producers and not consumers. Mr Corbett seems to be running the same ads as the American Petroleum institute, the industry’s mouthpiece.”“Drive up utility bills”: Gas is bought and sold on a worldwide market and the production price of any single gas source has a negligible effect on the market rate. Currently, most Pennsylvanians get their gas from out of state, from states that already impose a severance tax. Gas that is produced in Pennsylvania goes into the same gas market as the gas from everywhere else, meaning that an increased production cost in Pennsylvania due to a severance tax will have little bearing on the price paid by consumers.
“Mr. Corbett’s advertisement feels a bit like an Alice in Wonderland scenario where everything is topsy-turvy,” stated David Masur of PennEnvironment. “The environmental community by and large has vocally supported the passage of the natural gas severance tax so for Mr. Corbett to attempt to claim the environmental high ground on this issue by opposing the extraction fee is a bit ridiculous.”“Kills jobs”: The argument that a severance tax will kill jobs is based on the idea that a tax will slow the production of gas in Pennsylvania and thus delay the creation of drilling jobs. This argument supposes that increased taxation will lead to less drilling. The massive amount of drilling currently occurring in Texas, Colorado, and the other states, each of which currently maintains a severance tax, belies this argument. Pennsylvania’s location, next to the major gas markets of the American northeast, means that Pennsylvania drillers will always have an advantage over other states due to decreased transportation costs.
Additionally, a recent Penn State study* reports that a severance tax will actually create jobs in Pennsylvania. The study predicts that for every $100 million paid in severance taxes, the Commonwealth will see a net job gain of 1,100 jobs. Meanwhile, the Allegheny Conference on Community Development estimates that 70% of the jobs at Marcellus Shale sites currently go to workers from out of state. The job increase from state and local spending based on a severance tax would employ primarily Pennsylvania workers, meaning that the net job gain for Pennsylvanians would be even higher than the study reports. The real truth is that failing to enact a severance tax will cost Pennsylvania thousands of jobs each year.
“If you want to lead Pennsylvania, misleading its citizens is a bad place to start,” said Josh McNeil of Conservation Voters of Pennsylvania. “Mr. Corbett needs to take down these deceitful ads.”Neither the Sierra Club nor Clean Water Action have made an endorsement in the Pennsylvania Governor’s race. Conservation Voters of Pennsylvania and PennEnvironment have endorsed Dan Onorato.
*Rose M. Baker and David Passmore, Benchmarks for Assessing the Potential Impact of a Natural Gas Severance Tax on the Pennsylvania Economy, September 13, 2010 http://www.personal.psu.edu/