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Gas Drilling Tax Impasse Costs Pa. $300 Million
New estimate says Pa. Marcellus impact fee leaves billions more on the table over 2 decades

HARRISBURG, PA (January 31, 2012) – Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center. 

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

The Pennsylvania Budget and Policy Center is tracking lost revenue through its Drilling Tax ticker, which measures revenue lost since October 1, 2009 by not having a tax in place. The ticker hit $300 million Monday, January 30, 2012.  

The $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years. 

“Drillers continue to get a free pass in Pennsylvania, while teachers work without pay, and victims of domestic violence are turned away from shelters,” said Sharon Ward, Director of the Pennsylvania Budget and Policy Center.

Across the country, 98% of natural gas is produced in states that have drilling taxes or fees. In many energy-producing states, that revenue supports services like education and health care, funds  environmental conservation and protection, and mitigates the impact of drilling on local communities.

Pennsylvania is the largest mineral-rich state in the nation without a drilling tax or fee of any kind. All 11 states with more gas production than Pennsylvania have a tax or fee. Unlike those states, Pennsylvania is giving away a one-time resource.

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

In a recent report, Reuters calculated that at current gas prices a Pennsylvania shale well would generate $2.4 million over 20 years under a tax comparable to West Virginia’s. By comparison, an impact fee approved by the state Senate would generate only $360,000 over that 20-year period. 

Based on an industry estimate that Pennsylvania will have 11,500 wells operating by 2020, Reuters determined that Pennsylvania will lose at least $24 billion in gas revenues over 20 years – and much more if natural gas prices rise.

“Giving drillers that kind of tax break will come out of the pockets of working Pennsylvania families now and for decades to come,” Ward said. “Pennsylvania can do better.”

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The Pennsylvania Budget and Policy Center is a non-partisan policy research project that provides independent, credible analysis on state tax, budget and related policy matters, with attention to the impact of current or proposed policies on working families.