Bankruptcies and foreclosures are up in areas where natural gas companies have had to close facilities and stop drilling due to the current market downturn and continually low commodity prices, the Tribune-Review reported over the weekend. This is just one example of why Governor Wolf’s proposed 6.5% severance tax on the natural gas industry could not come at a worse time.

The article in the Tribune-Review referenced a recent analysis by the Federal Reserve Bank of New York that showed “delinquencies on mortgages and auto loans have increased in counties where oil and gas jobs make up more than 6 percent of employment while holding steady or falling elsewhere.”

Further, the article reported that bankruptcy filings in Westmoreland, Washington and Beaver counties, and home foreclosure activity in Westmoreland, Beaver, Armstrong and Fayette counties have risen during the first five months of 2016 compared with this time last year. All of these counties are heavy shale drilling areas. Gov. Wolf’s severance tax would do nothing but exacerbate these circumstances and further hurt hard-working families throughout the Commonwealth.

Reinforcing that this could not be a worse time for higher energy taxes is a report conducted by the nonpartisan Independent Fiscal Office (IFO) in April that found Governor Wolf’s proposed severance tax, if implemented, would make Pennsylvania the highest natural gas taxed state in the nation. In fact, IFO concludes that the governor’s massive tax increase would lead to less overall natural gas production and higher energy costs for consumers, working families, small businesses and manufacturers.

Not only is the Pennsylvania natural gas industry already one of the most tightly regulated shale development industries in the county, but the state already taxes the industry through its unique impact fee, which not only works as designed, but has also generated $1 billion in revenue for the Commonwealth.

Here’s what else they’re saying:

  • “Analysis Says Wolf’s Proposed Severance Tax Rate is Among Nation’s Highest”: A new analysis by the state’s IFO ranks ’s proposed effective shale gas tax rate the highest among other large producers and neighboring states. Gov. Tom Wolf’s current severance tax proposal equates to an 8.5 percent tax rate over the life of a typical Marcellus Shale well, based on the wellhead price of gas, the IFO said. That’s compared to a lifetime effective tax rate of 5.4 percent in Oklahoma — the next highest among comparison states — and 5 percent and 1.1 percent, respectively, in neighboring West Virginia and Ohio. … The MSC said the IFO report “demonstrates that Gov. Wolf’s energy tax increase proposal would make Pennsylvania the highest natural gas taxed state in the country, with a tax rate at a whopping 54 percent higher than top gas producing states Texas and Louisiana.” (Post-Gazette, 5/3/16)
  • “Gov.’s proposed shale gas severance tax would be among highest in nation”: Tom Wolf’s proposed severance tax would be among the highest in the nation and could result in a significant decline in shale gas drilling in the state. … In a chart comparing those figures to other gas-producing states, the [IFO] said Wolf’s proposal would be among the highest taxes in the country. For instance, Oklahoma’s tax is at 5.4 percent, West Virginia’s is 5 percent, Arkansas’s is 4.1 percent and Ohio’s is 1.1 percent. The analysis also predicted an 8 percent decline in gas production if the severance tax is enacted based on companies’ response to the tax. (Beaver County Times, 5/4/16)
  • “Pa. Gov.’s Severance Tax Proposal Could Set Highest Rate in Nation”:’s IFO said this month that Gov. Wolf’s latest proposal to enact a 6.5% severance tax on natural gas production would give the state the highest effective rate in the country. In an analysis of the 2016-2017 executive budget proposal released last week, the IFO said Wolf’s plan to impose a 6.5% rate at projected regional prices ranging from $1.37/Mcf to $3.71/Mcf from 2016 through 2021 would lead to an effective rate of 8.5%. … If passed, only Oklahoma would have an effective rate anywhere near comparable at 5.4%, according to the IFO’s calculations. “The most recent IFO report further demonstrates that Gov. Wolf’s energy tax increase proposal would make Pennsylvania the highest natural gas taxed state in the country, with a tax rate at a whopping 54% higher than top gas producing states — Texas and Louisiana,” said MSC’s Dave Spigelmyer. “Given the ongoing market challenges that have led to deeply painful job and investment cuts that are impacting countless Pennsylvanians, there couldn’t be a worse time for new and even higher energy taxes.” (Natural Gas Intelligence, 4/27/16)
  • “Pa. Needs More Jobs, not New Energy Taxes”: To be clear: New job-crushing energy taxes will not only harm landowners and small businesses, but will also undercut future job-creating benefits that the entire Commonwealth and Lycoming County are already realizing. … By increasing the cost of doing business in one formation, some rigs — and the associated jobs and supply chain benefits that come in the form of small business opportunities for Pennsylvanians — will move elsewhere with a more competitive environment. (Williamsport Sun-Gazette editorial, 7/26/14)

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