Pennsylvania Senate Approves Natural Gas Severance Tax
Pennsylvania's Senate has approved a budget that includes a severance tax on natural gas for the first time. The tax, if implemented, would supplement the existing Impact Fee, ensuring local governments continue to receive compensation for drilling effects.
The proposed severance tax would apply to each unit of natural gas produced from unconventional wells, with rates varying based on the national benchmark price. While the tax's implementation remains uncertain, the debate among policymakers and industry groups has been ongoing for years.
Cities in Pennsylvania with significant natural gas extraction, like those in the Marcellus Shale region, could financially benefit from such a tax. If Pennsylvania had applied a severance tax of $0.025 per mcf in FY 2013, it would have raised 3.0 percent of the value of oil and gas produced, up from 2.3 percent with only the Impact Fee. Despite this, the proposed tax is unlikely to have a major effect on either government revenues or the investment climate for Marcellus shale developers.
Pennsylvania, the second largest natural gas producer in the US, has taken a step towards implementing a severance tax. While its impact on revenues and investments remains uncertain, local governments could see increased compensation for drilling effects. The debate over the tax continues, with policymakers and industry groups weighing its potential benefits and drawbacks.
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