Wednesday, September 2, 2009

No Philly Tax for Marcellus Shale Natural Gas

By Amy Worden and Mario F. Cattabiani

Inquirer Harrisburg Bureau
HARRISBURG - Gov. Rendell has, for the second time in a month, dropped one of his tax proposals aimed at helping to close the state's multibillion-dollar budget deficit.

Rendell said after meeting with industry officials that he would agree to delay his push to impose a tax on natural gas extracted from the Marcellus Shale.

"It won't be in the mix this year," he said, adding that he would likely revive the proposal next year. "We felt we should let the industry get off to a good start, and that surpasses our need for money."

Rendell's move comes on the eve of the first scheduled meeting of the budget-crafting legislative conference committee in more than a month. It also comes three weeks after the governor abandoned his plan to temporarily raise the personal-income tax by 16 percent in a budget concession with Senate Republicans, who control the upper chamber.

For months, Rendell had lobbied for the tax on the gas-rich Marcellus Shale reserve. At one point, the administration estimated it could produce $100 million in revenue in the first year.

But the Democratic governor said yesterday that he reconsidered the idea after watching natural-gas prices plummet to near-record lows and meeting with industry representatives who have invested millions to explore the natural gas reserve hundreds of feet beneath the ground.

The Marcellus Shale is a vein of rock containing vast reserves, running hundreds of feet below ground from New York to Virginia. Its exploration and extraction - estimated to be worth billions - has been made possible in recent years by advances in technology.

Senate Majority Leader Dominic Pileggi (R., Delaware) said it was no surprise that Rendell had abandoned the effort, noting that taxing an industry in its infancy was an unpopular move even among some members of Rendell's own party.

"The governor has recognized the realities of the situation," said Pileggi.

Although Rendell said he was no longer interested in the tax this year, Democrats who control the state House said yesterday it remained among the mix of possible revenue sources.

"It is definitely not off the table. Clearly, the governor is delirious from not eating enough on his new diet," said Johnna A. Pro, press secretary to House Appropriations Chairman Dwight Evans (D., Phila.). The governor has lost more than 40 pounds in recent weeks.

Other so-called niche taxes still on the table include higher cigarette taxes and a new levy on smokeless tobacco. Also under consideration is the elimination of a slew of long-standing sales-tax exemptions on such items as candy and gum, land-based phones, and basic cable. Rendell has said the removal of exemptions on all items except food and clothing and certain services could generate $1 billion.

Pressure is rising from various quarters to end the budget impasse, which today enters its third month.

A coalition of religious groups released a statement saying the legislature had a "moral responsibility" to act swiftly so that the most vulnerable citizens would not lose vital services. And a Democratic lawmaker from Philadelphia led a rally yesterday outside Pileggi's district office in Chester.

"It was another step to urge members of the conference committee and the General Assembly as a whole to get a fair budget in place, because people are hurting," said Rep. W. Curtis Thomas (D., Phila.), who was accompanied by about 20 supporters, including constituents and social-service workers.

Other rank-and-file members say the only way to get a budget done is for the full chambers to meet and to abandon the conference committee.

"Two months have gone by and the conference committee has not put out a proposal," said Rep. Bill Adolph (R., Delaware). "They should put proposals up, and then we can reach approval of a majority of the House and Senate. Nothing is going to get done unless we're back."

Over the last several weeks, Rendell has criticized the conference committee - whose job is to craft a final budget compromise - for making little progress during its two first meetings. He has described the process as a joke.

But yesterday he said he was optimistic that the committee could reverse course and head toward productivity.

"It doesn't have to be a joke, because there are some very good people on that committee," he said. "They've just got to put the BS aside."

Pileggi, a conference committee member, said that the public should not hold out any hope that today's session would bring the sides any closer. He described the conference-committee process to date as disorganized and useless.

"If anything positive comes from it, it would be a surprise to me and to most observers," Pileggi said. "It's 4 o'clock, and I have yet to have any idea what's going to be discussed. Even the local Kiwanis Club has an agenda for its meetings."

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