A closer look at proposed PA Severance Tax

This morning, Pennsylvania Governor Tom Wolf unveiled his plan for a new budget which includes a 5% severance tax on the value of natural gas produced at the wellhead plus 4.7 cents per thousand cubic feet. What this equates to is far more than the much-discussed “5% Severance Tax” will in actuality be much closer to a 7.5% tax, given current gas prices.

  1. In the past few months, nearly every operating E&P company has announced a reduced budget for 2015 in response to low natural gas and oil prices – some up to 100% cuts.
  2. Cycles in prices of oil and natural gas are nothing new to the industry, and something companies do their best to manage through until prices increase.
  3. Real people, real Pennsylvanians, have already been laid off across the Commonwealth from E&P companies to environmental firms to service provides as a result.
  4. The proposed 7.5% Severance Tax will further gouge operating budgets and not only reduce the amount to spend, but reduce the incentive to spend to bring more natural gas wells online
  5. The 7.5% Severance Tax has been touted to “raise $1 billion” – but at current production rates and prices of the ACTUAL price of gas at the wellhead – not the Henry Hub pricing, which the Governor’s team has been using – the numbers just don’t add up
  6. As of April, nearly $830 million will be paid from Impact Fees, money which has gone to projects across Pennsylvania – bust most importantly, back into the areas seeing the most activity to help with projects like traffic areas, lowering property taxes and reinvesting in environmental projects – all of which is now in jeopardy.

Below are links to several stories from around region about just what this proposed PA Severance Tax could mean.

Severance Tax=Recipe for Disaster Locals see 20-30% decrease in business, officials worry about pushing business away http://www.alleghenyfront.org/story/pushing-new-drilling-tax-when-gas-prices-are-low …George Stark @starkgeorge · Mar 2

ICYMI-Susquehanna & Bradford Co. unemployment rate is 4.2% How many jobs will Severance Tax cost? #WrongTaxWrongTimehttp://environmental.pasenategop.com/files/2015/03/Ventello-Testimony.pdf …

The 4th of July with Natural Gas
Guest Post: A Farmer's Perspective
George Stark

George grew up in Western PA, graduated from Dickinson College and has been involved in Public Policy matters since then. He has worked in Harrisburg and Pittsburgh on energy issues with a focus on Local, State and Federal matters. As the Director, External Affairs at Cabot Oil & Gas Corp, George directs the media, community and legislative relations for the company.

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