Rendell: Natural Gas Extraction Tax ‘Dead’

Governor Rendell Says Severance Tax Clearly Is Dead This Year

Senate Republicans Signal Unwillingness to Act

Harrisburg – The refusal of Senate and House Republicans to negotiate in good faith on terms of a promised natural gas severance tax has killed the effort to enact it into law this year, Governor Edward G. Rendell said today.

On an Oct. 19 conference call with key Democrats and Republicans from the House and Senate, Governor Rendell asked for counterproposals to a compromise tax plan that he had outlined last week.

On Oct. 20, the Republican majority in the Senate responded with a letter that did not make a new proposal, but instead restated their previously announced positions on the tax rate and on accommodating the demands of the drilling industry. The House Republican Caucus did not immediately respond to the Governor’s request.

“It is irresponsible for Senate and House Republicans to refuse to compromise and simply turn their backs on these negotiations after days and weeks and months of work. They signed a pledge to the people of Pennsylvania to enact a tax that requires drilling companies to pay their fair share for removing our state’s natural resources from the ground, and now they are walking away from that commitment,” Governor Rendell said.

“Their clear unwillingness to change their previous proposal or to resolve differences with the House Democrats and with my administration makes it obvious that they have killed the severance tax in this legislative session. It is a broken promise, as well as a misguided policy decision that will harm our environment, will leave our local governments without the financial wherewithal to deal with the impacts of drilling in their communities, and will increase the budget challenges that Pennsylvania will face in the years to come,” he added.

Governor Rendell originally proposed a severance tax in February of 5 percent of the value of the gas at the wellhead, plus 4.7 cents per thousand cubic feet. The House several weeks ago passed a bill containing a higher tax, and the Senate Republicans said they were willing to support only a rate of just 1.5 percent, along with numerous loopholes that would reduce taxes for drilling companies even further than that low mark.

On Oct. 11, Governor Rendell offered a new compromise proposal that would have called for a phased-in tax of 3 percent in the first year, 4 percent in the second, and 5 percent in the third. He personally met several times with legislative leaders and representatives of the drilling industry in developing that compromise.

Hearing no reaction to the new plan, and seeing no evidence that Senate Republicans planned to bring the House-passed bill up for debate, amendment or a vote, the Governor tried to restart the negotiations with the Oct. 19 conference call.

The Senate Republican leaders responded yesterday with a letter offering the same 1.5 percent rate, the same giveaways to the industry, and excuses about the legislative process to try to justify their own inaction.

The General Assembly has left the Capitol for its election recess, and Senate Republicans have announced that they will allow no votes during what remains of the legislative session after the Nov. 2 election.

“With little time left to enact the severance tax, the Senate and House Republicans’ adamant refusal to advance a meaningful counter-proposal speaks volumes about their intentions. They clearly desire to put costs of natural gas drilling on the backs of Pennsylvania taxpayers, rather than on the large multinational oil and gas corporations who stand to reap enormous wealth from our state’s resources,” Governor Rendell said.