Proposed Severance Tax Would Hurt Jobs, Investment, and Result in $1.4 Billion in Less State, Local Tax Revenue
HARRISBURG, Pa. – Marcellus Shale development will pump $14.17 billion into the state’s economy in 2010 and create more than 98,000 jobs, while generating $800 million in state and local tax revenues, according to an economic study completed by the Pennsylvania State University for the Marcellus Shale Coalition (MSC) and the Pennsylvania House Natural Gas Caucus.
The study notes a consistent increase in annual drilling and projects a $25 billion contribution to the Commonwealth’s economy in the year 2020. This level of activity would generate almost $1.4 billion in state and local tax revenue and create more than 176,000 new jobs.
The curtailment of drilling activity that would result from the imposition of the newly proposed severance tax would generate $1.4 billion less state and local total tax revenue between now and 2020 than if the industry is allowed to grow without the new proposed tax. It would also result in less job creation and overall economic benefits in Pennsylvania. No other mineral in Pennsylvania is subject to such tax. Other states competing for limited investment dollars reduce taxes on high cost shale development.
The House Natural Gas Caucus, a bi-partisan group of 56 legislators from across Pennsylvania, announced the findings of a study that was compiled with economic data provided by the member companies of the MSC.
“This study validates what is being experienced in my district and in other communities around the state where drilling in the Marcellus Shale has taken a foothold, focusing on real economic growth and good jobs for people in a number of fields,” said state Rep. Tim Solobay (D-Washington). “Pennsylvania has the hardest-working job force in America and the Marcellus represents an opportunity to prove that we’re up for the challenge of developing the largest, natural gas field in the United States.”
“During difficult economic times such as this, the findings from Penn State bring exciting news that will positively impact nearly every facet of Pennsylvania’s economy,” said state Rep. Brian Ellis (R-Butler). “We have a once-in-a-generation opportunity to improve Pennsylvania’s economy and our nation’s energy future by embracing and supporting the development of clean-burning natural gas.”
Using conservative assumptions for production, commodity prices and related factors, the study found the industry making the following current and future economic contributions to Pennsylvania:
- Natural gas production had a $2.3 billion direct impact on Pennsylvania’s economy in 2008, adding more than 29,000 new jobs and $240 million in state and local tax revenue. More than thirty-percent of all tax revenues remain at the level local.
- The industry will contribute a cumulative economic impact to the state of $265 billion by 2020, along with nearly $15 billion in state and local revenue. The study includes direct, indirect and induced jobs, and economic activity from Marcellus Shale development in Pennsylvania.
- Pennsylvania currently imports approximately 75% of its natural gas consumption. If Marcellus activity continues as expected, Pennsylvania could reverse its position as a natural gas importer to a net natural gas exporter by 2014.
The leading researchers on the study are Dr. Timothy Considine, School of Energy Resources Professor of Energy Economics with the Department of Economics and Finance at the University of Wyoming; Dr. Robert Watson, Emeritus Associate Professor of Petroleum and Natural Gas Engineering and of Environmental Systems Engineering at the Pennsylvania State University, and Chairman of the Technical Advisory Board for the Bureau of Oil and Gas Management of the Pennsylvania Department of Environmental Protection.
The study estimates that the Marcellus Shale may contain 2,445 trillion cubic feet of natural gas reserves in place with recoverable reserves amounting to 489 trillion cubic feet – or enough natural gas to last the entire United States for more than 20 years. Taking into account the other vast reserves of domestic natural gas, the Marcellus Shale will more than likely support Pennsylvania’s economy for 100 years or longer.
According to the Energy Information Association (EIA), natural gas usage is expected to increase more than 20% through the 2020 in the United States and 40% worldwide. The EIA also indicates that 57% of all new electric generation will come from natural gas, which is more than all other sources combined.