DeWeese Bill Allows Property Tax Assessments Of Oil, Gas, Coal-Bed Methane

In an effort to help counties, municipalities and school districts with their budgets, House Majority Whip Rep. Bill DeWeese (D-Greene) is introducing House Bill 10 to allow counties to assess value to natural gas, oil and coal-bed methane.

 

The oil and gas industry in Pennsylvania reacted negatively to the proposal saying, 'The natural gas and crude oil industry has sustained the economic base of many rural Western Pennsylvania communities for more than 100 years, and with the prospect of the Marcellus Shale, it is the brightest spot in the Commonwealth for job growth and economic development. Yet before we even begin to develop the Marcellus Shale, state and local governments are anxious to tax it, potentially jeopardizing its growth in the process and hundreds if not thousands of Pennsylvania jobs."

 

"The polling data is clear: Pennsylvanians are overwhelmingly against (the Governor's proposal) allowing counties to increase their sales tax by 1 percent," Rep. DeWeese said. "However, like the Commonwealth, local governments are facing budget shortfalls and need assistance for their coffers. I believe the burgeoning natural gas drilling industry that is rampant across the state can provide that financial aid without a cost to local taxpayers.

 

"Gas operators have been drilling natural gas and methane gas wells throughout the western part of the Commonwealth and they do so virtually tax free. Proposals to drill for gas through the vast Marcellus Shale formation are spreading this phenomenon far beyond southwestern Pennsylvania," said Rep. DeWeese.

 

Rep. DeWeese said that before December 19, 2002, these natural resources were being taxed at the local level, similar to the way coal and other mineral resources are assessed. However, on that date, the Pennsylvania Supreme Court decided in "Independent Oil and Gas Association of Pennsylvania, et al v. Board of Assessment Appeals of Fayette County" that the General Assembly had not explicitly recognized gas and oil as a taxable interest.

 

"The legislation that I am reintroducing this session would correct that oversight to the benefit of counties, local municipalities, school districts and their taxpayers. The additional revenue that the local entities would receive from the drillers would be just one step in helping to prevent future local tax increases," he said. "We are only asking the owners of these natural oil and gas resources to pay the same local property taxes as other property owners in the Commonwealth do."

 

Rep. DeWeese clarified that the value would be assessed against the developer or driller, not the landowner or farmer on whose property the wells are located.

 

Rep. DeWeese said nearly every state taxes natural resources; therefore allowing such an assessment at the county level would not drive the drilling companies to neighboring states. In fact, the president of the Pennsylvania Oil and Gas Association recently was quoted as saying such an assessment would not drive companies out of state.

 

The legislation is supported by the County Commissioners Association of Pennsylvania, Pennsylvania State Association of Township Supervisors, Pennsylvania State Association of Boroughs and Pennsylvania School Boards Association.

 

Recent technological advances, which have provided the ability to extract from the Marcellus Shale natural gas formation, vastly increased estimates for the assessed value of gas and oil in Pennsylvania from between $10 billion and $20 billion, to closer to $1 trillion.

 

The Marcellus Shale underlies approximately 2/3 of the Commonwealth (54 of 67 counties) and portions of New York, West Virginia and Ohio at a depth of 5,000 to 8,000 feet and is believed to hold trillions of cubic feet of natural gas.

 

Penn State University geoscientist Dr. Terry Engelder recently told those attending the first Pennsylvania Natural Gas Summit in State College that there are 363 trillion cubic feet of recoverable gas in the Marcellus Shale, enough to supply all of the nation's natural gas needs for 14 years.

DEP said the total number of all well permits granted in 2008, which includes gas, oil and coal bed methane totaled 7,927. It expects to issue more than 11,000 permits in 2009, creating thousands of associated jobs. In 2008, DEP issued 451 drilling permits for Marcellus Shale.

 

"On behalf of hardworking, taxpaying local property owners throughout the Commonwealth, as well as county commissioners, municipal officials and school board members who face difficult budgets, I am proud to introduce this legislation, to ensure that everyone pays their fair share of property taxes and doesn't push off the burden to others," he said.

 

 

The Independent Oil & Gas Association of Pennsylvania and the Pennsylvania Oil & Gas Association released the following joint statement in response to Rep. Bill DeWeese's proposed legislation.

 

"The natural gas and crude oil industry has sustained the economic base of many rural Western Pennsylvania communities for more than 100 years, and with the prospect of the Marcellus Shale, it is the brightest spot in the Commonwealth for job growth and economic development. Yet before we even begin to develop the Marcellus Shale, state and local governments are anxious to tax it, potentially jeopardizing its growth in the process and hundreds if not thousands of Pennsylvania jobs. Tens of thousands of Pennsylvanians are currently employed by the oil and gas industry and contribute significant revenues to local taxing authorities. The potential for many new jobs as drilling activity increases will only add to these benefits.

 

"We strongly believe the legislature wants Pennsylvania to be a leader in the development of this important energy source. The Marcellus Shale could provide an economic boost for the Commonwealth for many generations, but not if it is prohibited from developing through a hastily imposed property tax.

 

"There is never a good time to slap unnecessary taxes on job-creating industries, but with the current state of the global economy any new taxes will certainly stunt economic growth and send a bad signal to the business community. The price of natural gas sold for $13.105 per Mcf just last July and is now selling at $3.87 per Mcf. At the same time, the number of national onshore natural gas drilling rigs stood at 1,306 last September and has since fallen to 917 with more rigs expected to drop in the coming weeks and months.

 

"History has shown that crude oil and natural gas drilling does not place a burden on local services that needs to be made up with new taxes. Even still, companies investing in Pennsylvania Marcellus Shale development have and will continue to work with local officials to minimize impacts and address and/or provide compensation for any impacts caused by operations. For instance, the industry has invested millions of dollars across the Commonwealth in constructing new roads -- at no cost to taxpayers or local governments.

 

"Repairs to roads are made at the expense of the drilling company and insured through bonding arrangements; frequently resulting in better roads than what existed prior to drilling. Drilling places no burden on counties, which would collect a large share of an imposed property tax.

 

"Pennsylvania is blessed with rich natural resources, including a potentially large natural gas field in the Marcellus Shale. Although the associations strongly oppose new forms of taxation, especially while the development of the Marcellus Shale is in its infancy, the industry remains willing to work with the legislature on issues to promote the development of the resource."