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Pennsylvania governor proposes new tax on natural gas extraction

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Staff writer ▼ | February 11, 2015
Tom Wolf
Oil and education   "We can get Pennsylvania back on track"

Pennsylvania Governor Tom Wolf proposed a new 5 percent severance tax on the state's booming natural gas extraction industry.

Pennsylvania’s schools have suffered from $1 billion in funding cuts in recent years forcing school districts to increase class sizes, lay-off teachers and other staff, and make serious program cuts that make it more difficult for students to get a strong education in Pennsylvania’s public schools.

"We can get Pennsylvania back on track, and we can start by passing a commonsense severance tax that will help fund our schools – an idea with bipartisan support," Governor Wolf said.

"The commonwealth ranks 45th in the nation in percentage of state funding for public education, and as a result, we have seen larger class sizes, fewer teachers, and vital program cuts. These cuts have made it more difficult for students to get a strong education in Pennsylvania’s public schools. This is the right thing to do for our children and our economy and to move Pennsylvania forward."

The proposal, called the Pennsylvania Education Reinvestment Act, enacts a reasonable 5% severance tax plus 4.7 cents per thousand feet of volume on extraction, which is expected to generate over a billion dollars in fiscal year 2017 prior to exemptions. It is modeled on neighboring West Virginia’s severance tax plan.

Pennsylvania sits on one of the largest deposits of natural gas in the world. Other natural gas producing states, including Texas and Oklahoma, levy a similar – and in some cases higher – tax on extraction to fund key priorities and initiatives.

Implementing a similar structure to West Virginia will ensure that Pennsylvania is competitive with neighboring states. In addition, this approach has the benefit of being field tested.

West Virginia offers proof that a state can build a thriving and unconventional natural gas industry while simultaneously using a portion of the proceeds to help make a better future for its citizens.

The proposal would continue the payments made to impacted communities and make reasonable exemptions for: gas given away for free; gas from low producing wells; and wells brought back into production after not having produced marketable quantities of gas. It will also contain provisions to protect property owners who lease land for natural gas exploration.

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