Natural Gas Tax for Pennsylvania a Possibility

Submitted by Editor on Fri, 01/30/2009 - 12:17pm.

Lawmakers Call for Drilling Tax

A Pennsylvania industry task force, comprised of state Department of Environmental Protection and representatives of the natural gas industry, met this month for the first time to develop new rules for controlling wastewater pollution from drilling operations and methods to treat wastewater. They also discussed ways to streamline the permitting process.

The Marcellus Shale natural gas deposit has sparked an oil and gas well drilling boom in Pennsylvania, where more than 4,100 wells were drilled statewide last year. Hundreds of permits for additional well drilling are under review by DEP.

Heavy use of local resources has generated considerable discussion of the new activity, and the Chairman of the state House Environmental Resources and Energy Committee Camille “Bud” George (D-74), has suggested taxing these operations as a revenue source for local infrastructure and as an additional means to help balance the state budget.

While natural gas is a cleaner burning fuel, the drilling process uses a lot of natural resources and can be extremely harmful to the environment, including nearby water sources, if not executed properly.

The task force hopes to limit surface water discharges from wastewater treatment plants by encouraging reuse of the water used to fracture the shale; locate geologic formations capable of safe, deep, underground water storage; and evaluate new technologies for treatment.

Water use and wastewater disposal issues are already apparent from incidents in southwestern Pennsylvania.

The natural gas industry may have another hurdle, as some state legislators and fiscal watchdog groups are calling for a tax for mineral extraction. Across the nation, the handful of states that are not facing massive budget deficits are those that have an abundance of natural resources and tax for extraction of those resources. In fact, Pennsylvania is the only state under these circumstances that does not impose such a tax.

George suggested that Pennsylvania take a page out of the playbook of these other mineral producing states, like Texas, Arkansas and West Virginia, and tax natural gas extraction.

Now facing an acknowledged $2.3 billion budget deficit, Pennsylvania could benefit from taxing drilling of the Marcellus Shale deposit, which has been estimated to hold enough natural gas to meet the nation’s natural gas needs for at least 14 years (equivalent to 363 trillion cubic feet of gas).

“Giving the oil and gas industry a free pass to utilize commonwealth waters, treatment plants and highways and skirt responsible safeguards makes no economic or environmental sense,” George said.

Source: Energy Resources Group, Harrisburg, Pa.