New Analysis Confirms Gov. Wolf’s Massive Energy Tax Hike Will Sting Pa. Families

The nonpartisan Independent Fiscal Office (IFO) once again confirms in a new report that Gov. Wolf’s latest proposal for even higher energy taxes would make Pennsylvania the nation’s highest natural gas taxed state. 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.

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Far from “moderate” or “sensible,” IFO’s analysis makes clear that Mr. Wolf’s proposal is 54% higher than top gas producing states – including Texas and Louisiana – and 41% higher than neighboring West Virginia, making Pennsylvania an even less attractive place to invest and grow jobs.

While the governor has said that the energy industry “shows no signs of slowing down,” the reality is that Pennsylvania’s energy industry – including countless small businesses and laborers – continue to face deeply painful challenges. There couldn’t be a worse time for even higher energy taxes and more onerous regulations that will cost more local jobs.

Here’s what they’re saying:

Highest Energy Taxed State

  • “Analysis Says Wolf’s Proposed Severance Tax Rate is Among Nation’s Highest”: A new analysis by the state’s IFO ranks Pa.’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”: Gov. 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”: Pa.’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)

Even Higher Energy Taxes Cost Pa. Small Business Jobs

  • “Everybody is Suffering” from Energy Market Downturn: Jami Patel spends long hours behind the front desk of a nearly empty motel, desperate for someone, anyone, to check in. Hardly anyone ever does, not since the once-booming natural gas industry pulled up stakes amid a prolonged, severe slump in energy prices. “I don’t know how much longer I can hold on,” lamented Patel, 43. “If it continues like this, the business is going to be dead.” … With the number of rigs drilling for oil and gas falling to all-time lows across the nation last week, Patel and other residents and business owners in Pa.’s vast Marcellus Shale gas field are adjusting to life after the boom — while hoping for the eventual return of an industry that pumped billions of dollars into the economy. … Towanda’s story is playing out everywhere the drillers are leaving or have left, places like Gillette, Wyoming, and Oklahoma City, where there have been massive job layoffs at energy company headquarters and the downturn has blown a billion-dollar hole in the state budget, leading to funding cuts to schools, prisons and other services. … Only 16 rigs are actively exploring in Pa., down from a high of 115 in 2011 and the fewest since December 2007, according to Baker Hughes. Energy firms and the businesses that directly cater to them are laying off thousands of workers in Pa., with 1 in 5 jobs disappearing in a single year. Unemployment is rising in nearly all of Pa.’s top drilling counties while generally falling in the rest of the state. “I don’t think anybody saw it coming, to this deep of a decline that quickly,” said MSC’s David Spigelmyer. Cratering commodity prices are the culprit. Gas extracted from the Marcellus Shale — the nation’s largest natural-gas field — is selling at a deep discount, the result of oversupply and inadequate pipeline capacity to take the gas to far-flung energy markets. … Some have stopped drilling altogether. The fallout is readily apparent in Towanda. (AP, 4/19/16)
  • Pa. Small Businesses Cut Jobs, Scale Back Amid Historic Downturn: Five years ago, the Marcellus Shale bonanza attracted 115 drilling rigs to the state, each requiring a battalion of suppliers, trucks, earthmovers, equipment manufacturers, and support services. This month, the rig count fell to 16, a number not experienced since 2007. Last year’s energy-price plunge undercut the business across the nation. [Gas producers] cut operations and sold assets to stay solvent. Some went bankrupt. Those financially strong enough to survive are hunkered down. “We’re going through a historic downturn,” said David Spigelmyer, president of the MSC. “We lost maybe $10 billion in capital spending in 2015, and are heading the same way in 2016 with the rig count.” … Still, the downturn has depressed local economies. The traffic that energized and disrupted rural life has subsided. Sales of clothing, food, and vehicles are down. Skilled welders have taken jobs at Walmart. Unemployed workers stay home and don’t spend. “Just the sheer volume of people in restaurants, hotels, even at some charity events, they’re definitely not there anymore,” said Stan Foster, chief operating officer of Superior Energy Resources L.L.C., a Brockway, Pa., gas field-services company. … At midday recently, it was practically empty at the Mountain Inn in Clermont, McKean County, a bar and restaurant where once it was not uncommon for rig crews to order takeout of 30 hamburgers at a time. … “Usually, we’d have a full bar now,” said Brenda Walker, the inn’s owner. She has cut hours and reduced her staff from nine full-time employees to four part-timers. “The past year has been horrible,” Walker said. (Phila. Inquirer, 4/24/16)

Natural Gas Infrastructure Supports Good-Paying Union Jobs

  • Top Union Leader: “For Job Creation, Let’s Build Energy Infrastructure”: If America is to maintain its edge as a global energy superpower, and sincerely commit to creating more solid, middle-class jobs across the nation, we must make the necessary commitments to build out a national energy infrastructure that will support and enable the continued development and utilization of all energy resources. Revamping America’s energy infrastructure could mean about $1.14 trillion in capital investments — the kinds that would save substantial energy dollars and create secure jobs by 2025. According to an infrastructure investment study, “building, maintaining and updating the oil and natural gas industry’s transportation and storage infrastructure” could grow the economy by $120 billion and generate 1.15 million jobs on average annually. Pipeline investments alone would fortify the job market with over 830,000 additional jobs. And these are jobs that pay, on average, three- and four-times the federal minimum wage. … Unfortunately, in many instances, federal red tape, archaic permitting processes and a small but vocal minority of radical environmentalists are jointly bringing job generators like pipeline and transmission line projects to a screeching halt. (The Hill op-ed, 4/25/16)
  • LiUNA Chief: Constitution Pipeline Rejection an “Insult” to Union Workers: The Constitution Pipeline permit denial is both a disappointment and an insult to the citizens of New York and the thousands of hard working tradesmen and women who would have benefited from the good jobs and affordable clean energy. The project was shovel-ready and would have been built under a Project Labor Agreement; ensuring that thousands of highly-skilled and trained construction workers would have job opportunities with family-supporting wages and benefits. … Despite the hysteria surrounding pipeline construction, pipelines are the safest way to transport natural gas. … Instead of considering what is in the best interest of the people of the great state of New York, the decision by the NYSDEC undermines the economy, progress on clean power, and access to affordable energy. (Release, 4/26/16)
  • Nat’l Building Trades: Natural Gas Pipeline’s Denial a “Callous Blow” to Thousands of American Workers: NYCDEC has delivered a callous blow to thousands of New York’s skilled craft construction professionals. To add insult to injury, the rejection of this pipeline will only worsen the outlook for natural gas and electricity pricing in many areas of New York State and New England. … The men and women of New York’s building and construction trades unions are some of the most highly skilled, trained and safe craft workers found anywhere in the world, and they would have constructed this pipeline with a strict adherence to safety, quality and environmental stewardship. The rejection of the Constitution Pipeline is just another example of a regulatory system that fails to balance and protect all public interests, including and especially those of American workers and energy consumers.” (Release, 4/25/16)
  • “Cuomo’s Energy Jobs Veto”: The Constitution Pipeline promised to deliver enough natural gas from the Marcellus Shale to fuel three million homes in New York and New England. Converting to natural gas would save the typical upstate New York homeowner $1,000 per year. … The developers including Williams and Piedmont Natural Gas dispute the agency’s story, and green groups are taking victory laps. The greens hope that restricting the market for shale gas will limit drilling in the Marcellus. (WSJ editorial, 4/26/16)

We need common sense solutions that position Pennsylvania, and the nation, to be a leader in energy production, job growth and manufacturing. For more energy facts, visit the MSC’s blog and connect with us Facebook, Twitter, and LinkedIn.