STEELTON – A 5 percent severance tax on shale-gas drilling that Gov. Tom Wolf plans to announce would be punitive and hurt a burgeoning industry in the long run, House Speaker Mike Turzai warned Monday.
The Marshall Republican said he hasn’t seen details of Wolf’s budget proposal, which the governor will deliver Tuesday to a joint session of the legislature, but he expects a “significant increase in taxes and a significant increase in spending” overall.
Turzai spoke to reporters on a windblown hill at Dura-Bond Pipe, a manufacturer that intends to hire 150 people this year because of the thriving Marcellus shale industry, according to its vice president, Jason Norris.
Norris, an Export native, said he could not estimate how a tax might affect the jobs. Such taxes tend to get passed onto consumers, he said.
Dura-Bond employs about 350 people at a former Bethlehem Steel Corp. plant.
“We are fighting for survival” against foreign manufacturers, Norris said.
Overall, the shale industry has produced 240,000 direct and indirect jobs for Pennsylvania, Turzai said.
Some lawmakers and analysts expect that Wolf, a Democrat, will announce a plan that shifts some of the state’s tax burden from property taxes to income or sales taxes. Wolf emphasized the tax on shale-gas drillers in his campaign.
Asked whether a gas tax of some amount could be part of a compromise between the Republican-controlled legislature and Wolf, Turzai said: “We’re not there yet.”
Turzai said the effective rate of the tax would be much higher, in part because of low natural gas prices.
The drilling industry has said the tax proposal — which in addition to the 5 percent levy includes a fee of 4.7 cents per thousand cubic feet of gas that comes from wells — would hurt companies that are reeling from low prices.
Most major producers in the Marcellus and Utica shale formations have announced reductions in capital spending by up to 46 percent this year, and some companies are laying off workers.
The quick increase in production in Appalachia before pipelines were built to take gas to attractive markets fed a glut that pushes prices lower than the national benchmark, especially in the northeast corner of the state. The Marcellus Shale Coalition said Wolf’s proposal results in an 8.4 percent tax in that part of the state and a 7.1 percent rate closer to Pittsburgh.
The Governor’s Office estimates the effective rate at 5.7 to 5.8 percent.
This article was written by Brad Bumsted from The Pittsburgh Tribune-Review and was legally licensed through the NewsCred publisher network.