Marcellus Shale Needs to be Taxed?

Despite enormous deficits in Pennsylvania’s budget, Gov. Tom Corbett has not included imposing a severance tax on Marcellus Shale in Pennsylvania in his proposal. While this tax will not close all the gaps in the budget, it can ensure Pennsylvania’s natural resources are used properly.

The severance tax can fund testing in rivers and streams to ensure water quality is not deteriorating due to drilling and fracking in the surrounding areas. Currently, Pennsylvania is the only major gas producing state without a severance tax. Alaska, West Virginia, Arkansas and Texas already have taxes.

This has not reduced their production levels, nor has it deterred gas drilling companies from locating in their respective states. A bill proposed by Pennsylvania State Representative Greg Vitali calls for a two phase extraction tax that would be slightly less than the current rate in West Virginia.

This tax will generate an estimated $245 million in the 2011-2012 fiscal year, and has the potential to generate nearly $570 million by 2015. Under this proposed bill, the revenue generated from the tax will be shared by the state’s general fund, municipal governments and environmental programs.

While this tax alone is not enough to close the $5 billion gap in our state budget, it can help compensate for some of the drastic cuts to education and healthcare. Imposing a severance tax will not reduce jobs nor incomes.

The tax will ensure all Pennsylvanians are benefitting from natural resources that are extracted in an immensely profitable and growing business.