A Hundred Million Dollars Lost to Legislative Inaction on Severance Tax

The Pennsylvania Budget and Policy Center is tracking how much severance tax revenue the state has lost over the past year. It hits $100 million this weekend.

HARRISBURG, PA (October 21, 2010) — This weekend, Pennsylvania will reach a new milestone — $100 million in revenue lost by the Legislature’s failure to approve a natural gas severance tax.

The Pennsylvania Budget and Policy Center is tracking in real-time how much severance tax revenue has been lost since October 1, 2009 by not having a tax in place.

Lawmakers' inaction has left the environment unprotected in the Marcellus Shale region of the state. It has passed the local costs of increased drilling on to state and local taxpayers. And it has left revenue on the table that could have prevented cuts to early childhood programs, libraries and domestic violence shelters.

“Lawmakers have put the interests of out-of-state drillers like Exxon Mobil and Shell ahead of the interests of Pennsylvania communities,” said Sharon Ward, Director of the Pennsylvania Budget and Policy Center.

Last week, the Senate adjourned for the year without taking up a severance tax bill, despite promising to enact the tax in last summer’s state budget agreement. On Thursday, Governor Rendell said the severance tax is “clearly dead” this year.

“The Legislature promised to enact a severance tax last summer, but so far Senate leaders have only thrown up obstacles to getting the job done,” Ward said.

Across the country, 96% of natural gas is produced in states that have severance taxes. Severance taxes provide a significant source of revenue in many energy-producing states for critical services like education and health care.

Pennsylvania is the only mineral-rich state in the nation without a severance tax of any kind. All 14 states with more gas production than Pennsylvania have a natural gas severance tax or fee. Unlike those states, Pennsylvania is giving away a one-time resource.

Local communities are feeling the impact of increased natural gas production in the Marcellus Shale. Public safety and emergency response calls are up, housing costs have increased, and heavy truck traffic is damaging roads and bridges.

Failure to enact a severance tax has also left environmental regulators without the proper resources to monitor gas drilling and mobilize cleanup efforts when they are needed.

“Pennsylvania taxpayers should demand that lawmakers return to Harrisburg to do their job,” Ward said. “There’s no excuse for this type of delay and inaction. The gas industry shouldn’t be getting a $100 million tax break when drilling is having an impact on local communities and the environment - and critical services are being cut.”

View the methodology used to create the Ticker.