The proposed severance tax on extracted natural gas in Pennsylvania is a hot issue right now in Harrisburg. The real question remains as to, what do the Pennsylvania voters want?
A recent poll numbers saw a 55 percent of voters who appear to be in favor of a severance tax. However when asked additional questions in a follow up poll regarding the severance tax and job opportunity answers tended to waiver.
- 57 percent of voters were opposed to raising tax on natural gas producers to pay for public employee pensions
- When given a choice between taxes and jobs polled voters chose jobs
- 61 percent of voters chose “creating new jobs,” over higher taxes on natural gas to fund the state budget
As of 2012 Pennsylvania is the third-largest natural gas producing state in the country. However, over the last decade Pennsylvania is not the only state who has been developing its shale gas production. Currently there are roughly 50 natural gas rigs operating in the state of Pennsylvania which is half of what there was in 2012.
This cut back is largely due to shale competition across the rest of the country and the competitively low natural gas prices. It is largely possible that the new energy taxes would reduce shale development activities in the state of Pennsylvania. The income and corporate taxes in Pennsylvania are already some of the highest in the country, especially when compared to the states that do have a severance tax in place. These pre-existing high tax rates in combination with the impact fees make Pennsylvania one of the most expensive places to drill in the U.S.
According to Raymond James analysts 90 percent of all new jobs in Pennsylvania between 2005 and 2012 came from the oil and gas industry. The Pennsylvania Department of Labor and Industry reports that as of 2013 Marcellus Shale related industries employ around 245,000 people in the state of Pennsylvania. They also report the average wage within core shale industries is $89,800, which is more than twice the national average for all industries. Below is a projection for the oil and gas industry into the next six years if Act 13 continues as the state’s revenue source.
The type of economic expansion that has occurred over the last seven years could come to a screeching halt if the cost of continuing operations in Pennsylvania continues to rise. In such a competitive industry operations and thus jobs tend to move toward the path of least resistance. With neighboring state like Ohio who has lower income tax and corporate tax and no impact fee, a new and steep tax like the one proposed for Pennsylvania could threaten current PA jobs. In addition to impact fees the image below shows the state taxes that are already generating revenue form Marcellus Producers.
