Marcellus Shale Drillers pay taxes!
Or so says Governor Tom Corbett. He told a crowd at the Lebanon Valley Chamber of Commerce that the drillers have paid $71 million in taxes to the state coffers over the past two years.
There is, of course, an element of truth to that–however, there is no way to determine if this is just the drillers tax revenue. The reason? Well, this $71 million includes corporate net income taxes, corporate stock options, franchise taxes, employee wage taxes, as well as sales and usage taxes on item. This is a pretty broad spectrum of taxes we’re talking about. No taxes are paid on drilling equipment or supplies, as these are considered manufacturing expenses and there is also no property tax burden on gas reserves.
Add to this, an analysis by the PA Budget and Policy center revealed the following:
- 70 percent of companies pay no corporate tax
- 85 percent of oil and gas sector companies owed no taxes in 2008
- 967 pass-through businesses in the oil and gas extraction industry had a reported $597 million in positive PA source income in 2008. The ultimate recipient (individual or corporation) is unknown.
Of course, the amount of pass-through companies should come as no surprise; the biggest players like Chesapeake, Range Resources and Anadarko all have headquarters in other states. This means their revenues go outside of PA.
Even more astounding is the fact that we are still importing Natural Gas to PA. This means that PA consumers are helping to pay the severance taxes to Gas that is extracted in other states. Our gas is also being exported to other states and even overseas. Of course, we have no severance tax, so the other states do nothing to help our coffers, while those states with a tax get to tap the wallets of PA consumers.
I don’t think we can argue that the drilling companies are helping to fill the states coffers; nor can we argue that they are contributing to local economies; even if they’re bringing in the bulk of their technical expertise from outside of PA. However, what we can argue is whether or not they’re contributing in a meaningful fashion. The revenues from oil and gas drilling to the state’s coffers was $47.7 million in 2008 and $44.5 million in 2009; even though the number of wells increased. This revenue is less than 10% of the reported PA Source income from the pass-through businesses in the industry in 2008.
We need a severance tax–other states have them and the drillers did not pack up and leave town. Representative Kate Harper, a Republican from Montgomery county plans to introduce a Severance tax bill, modeled on the one from Arkansas that provides 1.5% tax on gross units severed for the first 60 months, then 5% thereafter on production exceeding 90,000 cubic feet per day.
The revenue collected through the tax would be distributed into the Natural Gas Severance Tax Account to be distributed as follows:
- 32 percent to the Education Supplemental Account whereby 2/3 would be used to support basic education and one-third would be to support community colleges and higher education in the Commonwealth;
- 29.6 percent to the Environmental Stewardship Fund (Growing Greener)
- 32 percent to the Local Government Services Account, to be further distributed to counties and municipalities affected by natural gas drilling, as well as ten percent to the Pennsylvania Emergency Management Agency;
- 1.6 percent to the Hazardous Sites Cleanup Fund;
- 1.3 percent to the Conservation District Fund for distribution to county conservation districts pursuant to guidelines established by the State Conservation Commission;
- 1.4 percent to the Fish and Boat Commission;
- 1.3 percent to the Department of Public Welfare to provide cash and crisis grants to low-income households under the Low Income Home Energy Assistance Program;
- 0.8 percent to the Department of Environmental Protection for State dam removal, restoration and repair projects.