Governor Wolf’s Natural Gas Tax Proposal
Governor Wolf (D-PA) continues to press for a natural gas severance tax despite ongoing layoffs and potential bankruptcies in the natural gas industry. Gov. Wolf proposed a 6.5% severance tax (starting July 2016) on the value of natural gas, minus a credit for the impact fee, generating an estimated $218 million in revenue. The Independent Fiscal Office (ISO) estimates the current impact fee represents an effective severance tax rate of 5.5% (based on current gas prices and drilling production).
With an effective rate of 5.5%, natural gas producers are paying more than Wolf’s original 5% severance tax proposal. In addition to higher taxes, the administration is revising drilling regulations with an estimated cost of $41 million to $73 million in the first three years. The Marcellus Shale Coalition estimates these rules will cost significantly more, at $2 billion a year. At the same time, the Department of Environmental Protection is developing new methane emission regulations that will impose additional costs.