Natural gas severance taxes and regulations causing a stir in the political community

Joanna Harlow

Regulations and taxes on the natural gas industry continue to be a hotly contested issue at the state level. A key element of the budget deadlock is Governor Tom Wolf’s call for passing a severance tax on natural gas. Wolf has proposed a five percent severance tax on natural gas production most of which will go towards education.

The budget proposal would invest $15 million generated through a commonsense severance tax on gas drilling into the commonwealth’s community colleges. According to a Pennsylvania Department of Education press release, the funding will restore 75 percent of cuts made to community colleges since 2011. Overall, Wolf’s budget plan restores higher education cuts by providing$140.9 million more in funding to community colleges, PASSHE universities and state-related universities.

On Sept. 29th, more than 150 representatives of the gas drilling industry, environmental organizations and community groups gathered in downtown Pittsburgh at a U.S. Environmental Protection Agency hearing. In September, the EPA proposed the first federal rules to keep methane and gas out of the atmosphere.

The rules would require the industry to find and repair leaks, capture emissions from wells, limit emissions from compressor stations and reduce le

aks from pipelines. Guidelines for states to reduce emissions from volatile organic waste are also included in the proposal.

These proposed federal rules are part of Obama’s Climate Action Plan, which seeks to cut emissions by 40 to 45 percent by 2025.

This is the first attempt by the EPA to regulate methane, a colorless, odorless gas that is benign to humans but potent at trapping heat in the atmosphere. According to the Federal Register, the EPA has estimated the new rule would cost the industry from $320 million to $420 million annually by 2025 but said it would reduce health-care costs and have other benefits totaling about $460 million to $550 million a year.

Representatives from a variety of environmental groups testified Tuesday that the EPA’s proposal doesn’t go far enough.

Board members of the Sierra Club noted that one molecule of methane produces 85 times the heat of a molecule of carbon dioxide over a 20-year period. Steven Hamburg, lead scientist for the Environmental Defense Fund, said his studies show that the industry is producing 700 metric tons of methane a year, equal to the output of CO2 from 150 coal-fired electric plants.

The EPA will be accepting public comment on the proposed methane rule through Nov. 18.

With the Pennsylvania State Budget still hanging in the balance, the hearing is timely.  Wolf says he will continue to stand by the promises he made during his campaign.  “We need to be like every other [gas producing] state, (by having) a severance tax,” Wolf told WITF’s Smart Talk.

Republicans have so far resisted the governor’s call. Pennsylvania Senate President Pro Tempore, Joe Scarnati, R-Jefferson County, implied in an interview with WHYY last month that a natural gas severance tax proposed by Governor Wolf would cost the state more than 250,000 jobs. Economists have contested this statement.

Pennsylvania is the only major gas-producing state without a severance tax.


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