The PA State Association of Boroughs again this week urged the General Assembly to adopt a natural gas severance tax to protect taxpayer investments. Their statement follows--

Across Pennsylvania borough officials are anxiously looking to their State Representatives in Harrisburg for support of a severance tax on natural gas. Their collective goal is to ensure that a fair portion of any extraction/severance tax will go to local governments to help taxpayers address the environmental and infrastructure impacts that are sure to be a result of natural gas drilling.

The state House of Representatives announced earlier this week that it would consider House Bill 1489 which imposes a severance tax on the extraction of natural gas.

“The PA State Association of Boroughs is supportive of the courageous legislators that are taking a stand now to protect the interests of local governments by ensuring that a fair portion of the tax will be dedicated to those who will face the impact of natural gas exploration and drilling,” said Ed Troxell, Director of PSAB Government Affairs. “PSAB is grateful for the support of legislators who protect local taxpayers by making sure that an adequate portion of severance tax revenues be allocated to all municipalities within regions that face the expansion of natural gas drilling.”

With traditional natural gas drilling, well pads are smaller and need less acreage; however, with the newer horizontal drilling method, well pads are larger requiring more acreage. Most of the boroughs in Pennsylvania are smaller in land size compared to townships, often more developed; therefore, a borough will most likely not be host to a drill site. This does not mean that a non-host borough will not face any impacts.

According to the Department of Environmental Protection’s website in July there were approximately 5 Marcellus Shale wells in boroughs and 7 wells in cities as compared to 1,281 wells drilled in townships. Townships however, are not islands. Large cities like Pittsburgh, Harrisburg and even Williamsport are the hubs of activity for outlying townships and boroughs. Boroughs are the hubs of townships in many of the areas where Marcellus Shale drilling is taking place.

“Our boroughs provide necessary services, not only to our residents but to residents and businesses in the more rural communities throughout the Commonwealth,” said association President Robert “Doc” Orr.

Many newspapers across the state have already reported chemical spills, well water contaminations, damage to local roads, an increase in police activity in communities with drilling, a decrease in tourism dollars due to hotels being filled with out-of-state workers, and a general overall increase in the demands on services provided by our local communities.

“Gaming legislation passed several years ago recognized the impacts that non-host governments would face and therefore adopted a funding formula to include a portion of the gaming tax to go to non-host local governments,” said Troxell. “We are asking the legislature to recognize that this same dynamic exists and that non-host local governments be provided a dedicated revenue stream to hold our boroughs and, in essence, local taxpayers harmless. We are not looking for a windfall!”

In PSAB’s last press release, we mentioned that the natural gas company Fortuna offered a landowners group $5,500 per acre plus a 20-percent royalty to lease their property. Over the weekend, these same landowners accepted a higher offer made by Chesapeake for $5,750 per acre with a 20-percent royalty; they picked up their checks, some reporting to be for more than $100,000. The details of the lease are available online.

The natural gas industry has been advocating that the economy is sluggish and that they are unable to afford a severance tax. If these same companies can pay this kind of money for leases, then PSAB believes these companies can afford a fair severance tax.

PSAB understands that every budget has its winners and losers, but taxpayers should not be the biggest losers while the natural gas companies are clear winners. We The People will pay increases in taxes to local governments and the state in order to provide local services while these out-of-state gas companies use tax loopholes to avoid paying their fair share of taxes.

Our volunteer firemen who spend thousands of hours fundraising to provide emergency services to their local communities are the losers as they will see 20 percent of the funds generated from small games of chance go to the state budget, while the multi-billion dollar gas companies avoid paying a severance tax because they are a 150 year old infant. We need to make sure an adequate amount of funds are allocated to protect infrastructure and the environment or all of us will suffer.

PSAB and our borough officials want to be part of the discussion on how to hold our citizens harmless in any plans for the state to levy extraction/severance taxes on natural gas drilling.

The association has put forth a detailed distribution plan which will provide revenue to both host and non-host municipalities in counties where natural gas is being extracted.

Our plan is based upon the time honored Liquid Fuels Tax distribution model and uses a weighted scale that is based on 50 percent population and 50 percent road mileage. Specifically, it provides an allocation for host counties, host municipalities and all municipalities based on the 50/50 allocation.

Borough officials throughout the Commonwealth agree - - - protect taxpayer investments, practice true conservation and pass a fair severance tax to protect the investments of our communities.

No doubt highly financed resistance will emerge during this debate, but borough officials look to legislators of integrity. Will you protect the interests and obligations of those communities who are faced with these impacts or succumb to outside interests which will merely seek to better their own bottom lines?

PSAB for nearly a century has sought to protect and provide for the interests of Pennsylvania’s borough communities. Today, that obligation has been laid before the PA House of Representatives, our locally borough officials anticipate your integrity.