HARRISBURG - Renewing a call for a state severance tax, Gov. Ed Rendell said Thursday that higher-than-anticipated bids for natural gas drilling on state forest land will come in handy to plug revenue shortfalls in the state budget.
Pennsylvania will realize $128 million in revenue from leasing drilling rights on 32,000 acres of forest land in northcentral Pennsylvania based on high bids submitted earlier this week by five companies.
The winning bids will generate more than twice the revenue anticipated when state officials prepared the leases in order to generate revenue to balance the 2009-10 budget, said Rendell at a press conference.
"Now we can walk into next year with $68 million in unanticipated oil and gas revenues," he said.
The successful bidding at an average per-acre bid of $4,100 is one of several signs the natural gas industry is healthy enough to pursue exploration of the deep gas pockets in the Marcellus Shale formation and pay a severance tax on the gas produced starting July 1, said Rendell.
Estimates that state permit applications for Marcellus Shale wells will quadruple this year and Exxon Corp.'s acquisition of XTO Energy, a natural gas firm, are two more signs the industry is rebounding, Rendell said.
Rendell said this represents a turnaround from conditions in the industry last August when he decided to stop pushing for a 5 percent severance tax that he had proposed when the budget debate started. Natural gas prices reached a seven-year low last summer, but energy prices have rebounded this winter.
The governor plans to meet with natural gas industry leaders next week to discuss a "fair and appropriate" severance tax as well as environmental issues relating to water contamination from drilling and disposal of water used in hydrofracking to break up shale formations to reach the gas pockets. He is looking for an agreement on "best practices" to limit the amount of state forest land impacted by drilling.
The successful bidding rekindled a debate about how Pennsylvania should deal with its emerging Marcellus Shale bonanza.
"It just shows increasing taxes are not needed," said Stephen Miskin, spokesman for House Minority Leader Sam Smith, R-66, Jefferson County. "It calls for smartly using the resources we have."
A group of House GOP lawmakers has called for leasing nearly 400,000 acres of state forest land over a three-year period for drilling.
The state should put a moratorium on leasing additional public land until it does a study of the impact of drilling on the forest environment and other public uses of the state forests, said Jan Jarrett, president of PennFuture, a statewide environmental group.
Pennsylvanians want to go slow on leasing state land for drilling, said Rendell.
rswift@timesshamrock.com
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