Fair Gas Taxcloser To Reality

October 21, 2018

In just over a decade, Pennsylvania has gone from consuming four times the amount of natural gas it produced to being a net exporter, as in-state gas prices have declined by about 40 percent. That is a remarkable and rapid evolution of the state’s energy profile — all the more so because it has happened with an incomplete system of pipelines to get gas from remote rural wells to urban, suburban and, increasingly, international markets. Now, the need to develop pipelines for a maturing gas industry also should advance the debate over fairly taxing gas production. Pennsylvania’s Republican and largely rural legislative majorities have refused to apply the same sort of extraction tax to the industry that it pays in every other gas-producing state, opting instead for a “local impact fee.” Although some of the money is distributed statewide, that per-well fee flows primarily back to the rural counties where gas is produced. Now, however, the industry has encountered stiff resistance in its efforts to construct pipelines from the gas fields through nonproducing counties that receive scant benefit from the gas enterprise. Sunoco announced Friday, for example, that it will use three existing pipelines to partially compensate for delays to the legally challenged Mariner East pipeline in Chester and Delaware counties in Southeast Pennsylvania. The new line is delayed until at least 2020, and the combined lines have substantially less capacity. In interviews recently with The Times-Tribune editorial board, Gov. Tom Wolf and state Sen. John Blake of Lackawanna County said a fair extraction tax, fairly distributed statewide for education and other public services, could help mitigate resistance to pipelines because the benefit would be more widely distributed. The impact fee is a bargain for the industry relative to the severance taxes imposed in other states, especially since the industry uses an array of financial devices to diminish the impact of other state taxes. Wolf wants to retain the impact fee, which wold continue to go primarily to producing counties, and add a modest severance tax tied to the price of gas that would match the overall rate in other gas-producing states. Pennsylvania, the second-leading natural gas producer among states, is a commonwealth. A fair and fairly distributed severance tax would demonstrate that in practice.