House Passes Version Of Severance Tax On Natural Gas Production

House lawmakers approved an amendment Tuesday to steer more revenue from a state severance tax on natural gas production to environmental programs. The amendment approved 154-45 earmarks the first $70 million in severance tax revenue to the state General Fund and $5 million for job training. After that benchmark is reached, the annual revenue distribution would be 60 percent to local governments and the state-overseen environmental stewardship fund and 40 percent to the state general fund. Lawmakers face a vote today (Wednesday) on the bill drawn up by House Democratic leaders, which sets the severance tax rate at 39 cents per thousand cubic feet of natural gas at the wellhead, a floor price that would be adjusted annually if the price of natural gas goes up. The House debate looms ahead of Friday’s self-imposed deadline for passing a severance tax, but it won’t be the last word on this issue as a drilling boom accelerates in the Marcellus Shale formation.

Leaders of the Senate say the tax rate proposed by House leaders is too high. “It is simply the wrong message to an upstart industry trying to expand much-needed jobs in Pennsylvania,” said Drew Crompton, an aide to Senate President Pro Tempore Joseph Scarnati. Senate GOP leaders want a severance tax, modeled after Arkansas, where a 1.5-percent tax rate would be set during a well’s first five years of production and 5-percent rate after that.

It’s uncertain how quickly a compromise could be reached on a severance tax bill that can win approval in both chambers and Gov. Ed Rendell’s signature. As part of the state budget package, leaders of both chambers declared their intent to pass a severance tax by Friday.  (Source: Republican & Herald, Pottstown).