Pa. Loses $300 Million to Gas Drilling Tax Impasse

A blog post by Chris Lilienthal, originally published at Third and State.

Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center.

Our Drilling Tax Ticker tracks the revenue Pennsylvania has lost since October 1, 2009 by not having a tax in place. It shot past $300 million Monday morning.

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

Plus, the $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years.

$24 billion? Yes. Reuters calculated that at current gas prices a Pennsylvania shale well would generate $2.4 million over 20 years under a tax comparable to West Virginia’s. By comparison, an impact fee approved by the state Senate would generate only $360,000 over that 20-year period.

Based on an industry estimate that Pennsylvania will have 11,500 wells operating by 2020, Reuters determined that Pennsylvania will lose at least $24 billion in gas revenues over 20 years – and much more if natural gas prices rise.

Keep in mind that across the country, 98% of natural gas is produced in states that have drilling taxes or fees. In many energy-producing states, that revenue supports services like education and health care, funds environmental conservation and protection, and mitigates the impact of drilling on local communities.

As Reuters put it:

Given the fiscal challenges of Pennsylvania, it would seem important to earn as much revenue as possible for the state’s natural resources. Maybe it’s time for the Pennsylvania General Assembly to revisit the issue and really determine how much impact this fee will have.

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