Across Pennsylvania, natural gas drilling in the Marcellus Shale has benefited not just companies but also human beings—by creating tens of thousands of jobs, rescuing families from foreclosure, and generating fortunes and sustainable prosperity for farmers, workers and small-business owners.
At a time when family budgets are stretched too thinly, affordable natural gas prices—a direct result of the drilling boom—are saving Pennsylvania consumers hundreds of millions of dollars this year through lower utility bills. While the benefits are unquestionable, special interest groups and tax-and-spend politicians unwisely see the industry as a cash cow for unnecessary, unsustainable and unworthy statewide projects. In short, people are once again losing out to poor policy and politics as usual.
Supporters of a natural gas tax wrongly claim a tax would protect the environment. In truth, Pennsylvania’s stringent laws and strict enforcement protect the environment and ensure drilling companies are held responsible for environmental and infrastructure damages. This is the responsible way to hold companies accountable and address environmental concerns, not with new taxes and policies that protect neither people nor the environment.
Moreover, tax advocates argue that gas extraction imposes environmental risks that justify an extraordinary tax. Both those supporting and opposing a tax care about the environment and believe businesses should pay for their costs, but many fail to understand the industry’s true impacts or contributions to communities. Although much misinformation has been thrust into the public and erringly repeated, drillers pay the very same taxes as every other business—more than $1.2 billion in state taxes since 2006. But the same just isn’t good enough for some.
House Bill 1863 sponsored by state Rep. Thomas Murt and Rep. Gene DiGirolamo is yet another natural gas tax proposal and an attempt to redistribute other people’s money to pet projects across the state. The bill even creates a special fund for Rep. Murt’s alma mater, Penn State, where he teaches part-time. The natural gas industry should pay for its impacts, but it shouldn’t be a bonanza for crony-driven projects.
As the General Assembly considers natural gas tax and fee proposals, legislators should vote based on sound principles protecting people, not politics or pressure from special interest groups.
Let there be no doubt, all businesses, including natural gas drillers, should pay the cost for government they use. If a driller is not paying for its negative impacts on the environment or infrastructure, it is appropriate to charge a fee to pay for the government’s cost to remediate the problem. This impact is not measured by how much money a company has, or how much profit a well makes, but for how much government it uses.
If equity is truly the aim of those crying for a fair share, then this type of fee should surely quench their thirst. Along these lines, any fee must consider what businesses are already paying in taxes, fees and contributions to local communities and the state, and only cover the difference in demonstrated impacts and current revenue.
However, before imposing a new fee, elected officials should consider whether the current tax and fee structures need to be revised to cover any uncompensated costs of government. For example, is it appropriate to adjust local hotel and emergency services taxes to address large numbers of seasonal workers? Or are there other fee mechanisms that can be more directly tied to government services being provided to gas drillers?
Finally, any fee should be optional for counties or municipalities to impose, not a statewide tax. This ensures competition among local governments, discourages excessive fee rates, and reduces the threat of cross-subsidization and redistribution of fee revenues to unrelated purposes. While some local officials are calling for more revenue, other county officials say they are already collecting enough in taxes and fees from drillers to cover the costs.
Unfortunately, HB 1863, like many other tax proposals, masquerades as an effort to protect communities and the environment while tragically forgetting that families and farmers will surely be left fractured. Before Pennsylvania’s future is left in the dark, our legislators must be led into the light of the realities of natural gas drilling benefits.
Katrina Currie is a policy analyst with the Commonwealth Foundation