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3 Days Left: House Passes Marcellus Severance Tax Vehicle, Senate Up Next
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Thanks to Reps Kate Harper (R-Montgomery) and Mario Scavello (R-Monroe), House Democrats passed an amended version of Senate Bill 1155 (Eichelberger-R-Blair) that would enact a Marcellus Shale natural gas production severance tax by a vote of 104 to 94.

            A list of those voting for and against is available online.
            The severance tax is expected to generate about $110 million in FY 2010-11 and about $316 million in FY 2011-12.
            The bill now goes to the Senate for consideration.  The Senate does not return to voting session until October 12 and will only be in session for three days before adjourning for the year.
            (Photo: Garth Lenz from Chesapeake Bay Foundation R.A.V.E)
            Thanks to motions by Rep. Kate Harper (R-Montgomery) and Rep. Mario Scavello (R-Monroe) on Tuesday, the House voted 154 to 45 on an amendment to more than double the monies going to the Environmental Stewardship (Growing Greener) Fund from the original Marcellus Shale severance tax proposed by some House Democrats.
            The House proposal as amended would distribute funds through this formula--
            For FY 2010-11, 2011-12 and 2012-13 the first $75 million shall go to: $70 million General Fund, $5 million Department of Labor & Industry for job training and for contracting with community colleges and other institutions of higher education for job training programs.
            After the above transfers, the money remaining is to be allocated as follows:
-- 40 percent to General Fund (the original House Democratic proposal was 60 percent);
-- 32 percent to the Environmental Stewardship (Growing Greener) Fund (the original proposal was 12 percent);
-- 16 percent to the Local Government Services Account;
-- 1.6 percent to Hazardous Sites Cleanup Fund;
-- 2.4 percent to Conservation District Fund;
-- 1.6 percent to Game Commission;
-- 1.4 percent to Fish & Boat Commission (the original proposal was 2.4 percent);
-- 1.6 percent to Low Income Home Energy Assistance Program;
-- 1.6 percent to Oil and Gas Environmental Disaster Recovery Account;
-- 0.8 percent to DEP for dam removal, restoration and repair; and
-- (New) 1 percent for the operation and administration of the Environmental Hearing Board.

 Source: From House Fiscal Note on Senate Bill 1155

            Most House members expressed disappointment with the contents of the original proposal, but agreed to support the bill to move the process along and help comply with a Senate-House budget agreement to pass Marcellus Shale severance tax legislation before October 1.
            Gov. Rendell earlier said he was counting on $70 million from the Marcellus Shale natural gas severance tax to fill the hole in the budget created when Congress failed to appropriate the full amount of Medicaid funds the budget anticipated.  Hopefully, the new, higher revenues now coming in will forestall any new budget cuts or state employee layoffs. (see separate story)
            "Working families across Pennsylvania pay their fair share of taxes; it's about time big oil and big natural gas do the same," House Majority Leader Todd Eachus (D-Luzerne) said. "This bill will give our environment programs the resources they need to protect our water supply and our land. And it gives communities that are impacted by this industry a financial shot in the arm to help them improve and maintain their roads, bridges, water and sewer systems."
            "House Democrats want Marcellus Shale gas drilling in the Commonwealth to create good-paying, permanent jobs for Pennsylvanians, and the tax credit aspect of this bill will make it easy for companies to choose to hire locally," House Speaker Keith McCall (D-Monroe) said. "This is about jobs that pay family-sustaining wages and help workers return dollars to their communities with purchases large and small."
            "I understand there may be different views about how we should implement this tax and structure the rate," said Rep. Dwight Evans (D-Philadelphia), Majority Chair House Appropriations Committee. "What's important is that we find common ground. We need a tax that is competitive with other shale states, but one that has a reasonable rate and reasonable features appropriate for Pennsylvania.
            "I also recognize the industry will want to weigh in and argue for a tax with a rate and characteristics that allow for capital recovery, a tax it can support as it does in every other state where drilling occurs," Rep. Evans added. "These issues are all negotiable. What is not negotiable is inaction. The natural gas in the Marcellus Shale play is a resource that belongs to the citizens of the Commonwealth and the citizens deserve to derive a benefit."
            House Minority Leader Sam Smith (R-Jefferson) said, "This bill is neither pro-environment, nor pro-business -- it is a pro-government spending bill. Raising taxes so government can spend more, while potentially limiting job creation and economic growth in Pennsylvania, is the wrong direction. Instead of focusing on jobs, the Democrats are fighting for spending and taxes. Republicans have a different vision – using the Marcellus Shale field as an opportunity for clean air and creating jobs.
            "In their zest to grab more tax dollars, the Democrats subverted the 'reforms' they continually tout to stop a vote on the 'Marcellus Works' jobs and clean air package.  This vote today showed the clear differentiation between the Republicans and Democrats in the House. The Democrat plan imposes a tax that's too high, sends too much tax revenue to the state treasury and not enough to local municipalities where drilling is happening and the impact is greatest."
            Environmental Reaction
            Andrew Heath, Executive Director of the Renew Growing Greener Coalition, said, "The Renew Growing Greener Coalition supports the passage of Senate Bill 1155 as amended by Rep. Kate Harper.  The Coalition applauds the funding allocation to the Environmental Stewardship Fund and Growing Greener.  This revenue will allow the Growing Greener initiative to continue benefiting local communities throughout the Commonwealth. 
            "The Coalition values the support of the members who voted for the bill’s final passage.  We recognize that for some this was politically difficult. 
            "We thank Rep. Kate Harper for putting forth the amendment that significantly increased the allocation to the Environmental Stewardship Fund and Growing Greener.
            "We thank Rep. (Todd) Eachus and the House leadership for encouraging their members to vote for Senate Bill 1155 as amended by Rep. Harper.
            "Our work does not end with the House passage.  Now our attention turns toward the Senate, where we have been encouraged by its Leaderships' support of Growing Greener.  The Senate Marcellus Shale Working Group has been engaging in an open dialogue with members of the environmental, conservation and recreation community and I believe there is a genuine sense of cooperation when it comes to our issues.
            "The Renew Growing Greener Coalition is committed to seeing this process to the end and we are excited to work with the Senate in producing the strongest bill possible.
            PA Faces Tough Clean Water Mandates
            The Matthew Ehrhart, PA Office Director of the Chesapeake Bay Foundation, sent this message to members of the House supporting the amended Senate Bill 1155--
            "The Chesapeake Bay Foundation, on behalf of our 16,800 members across Pennsylvania, asks that you support Senate Bill 1155 as amended by Rep. Kate Harper.  This bill, as amended, provides critically needed funding to the Environmental Stewardship Fund.
            "Last week the EPA published its draft Total Maximum Daily Load (TMDL), or pollution budget, for the Chesapeake Bay States.  They said very clearly that Pennsylvania’s draft plan to improve water quality to meet that TMDL was woefully inadequate, primarily because there was no documentation that the strategies and RESOURCES necessary to implement PA’s plan were available.  If the Commonwealth cannot improve its draft plan to demonstrate with reasonable assurance that implementation is possible, EPA clearly identified how it would use its legal authority.
            "In the absence of satisfactory assurance of implementation of the non-point source pollution controls for agriculture and suburban runoff, EPA will require limit of technology upgrades at wastewater treatment plans and they will dramatically increase the requirements of the MS4 stormwater permits held by many of our local communities.  EPA has the discretion to implement those Federal NPDES permit requirements. 
            "Adequate resources in the Environmental Stewardship Fund is a critical component to provide EPA with the reasonable assurance that the Federal Clean water Act Requires.  Senate Bill 1155, as amended by Representative Kate Harper, is a keystone to building a plan that EPA will accept and avoiding tremendously costly upgrades to our wastewater infrastructure."
            Industry Comments
            The Marcellus Shale Coalition issued this statement on the House-passed proposal--
            "This evening, the Pennsylvania House of Representatives passed a massive, uncompetitive new tax on the responsible development of clean-burning natural gas from the Marcellus Shale formation, which has helped create nearly 88,000 jobs in Pennsylvania alone as the state’s unemployment rate continues to remain near double-digits. 
            "This massive new tax – 39 cents per mcf of natural gas – represents the nation’s highest among shale gas producing states. In fact, this onerous tax on shale gas production is twice as high as West Virginia’s, currently the nation’s highest.
            "Equally problematic, this enormous tax does not allow for natural gas producers to recover and reinvest the millions of dollars required to produce shale gas from the Marcellus, as virtually every other major shale gas producing state does. Many members of the House of Representatives voted against this massive tax, recognizing the negative impact it would have on job creation and investment in Pennsylvania."
           "Kathryn Klaber, president and executive director the Marcellus Shale Coalition, issued this statement following the vote:
            “Votes for this misguided, unprecedented tax that narrowly passed this evening, are votes against the job creation and the responsible development of clean-burning domestic natural gas, which is helping to lower energy prices for Pennsylvania consumers and driving down our nation’s dependence on foreign sources of energy.
            “We are confident, based on Senator Scarnati’s public comments this evening, that the Senate will remain steadfast in their commitment to realize a competitive climate for growth for this industry, and prosperity for Pennsylvanians.
            “To make certain that Pennsylvania’s economy and workforce remain ahead of the curve in the increasingly competitive global economy requires commonsense solutions that encourage capital investment in the Commonwealth. A competitively structured tax in Pennsylvania, that allows for critical capital investment, coupled with smart regulatory and legislative modernizations, is key to ensuring that this historic opportunity is realized in ways that benefit each and every Pennsylvanian.”
            Senate GOP Reaction
            Senate Republicans have discussed, but have not yet put in writing, a more modest program with a much lower tax rate to provide $153.5 million to the General Fund and $77 million split evenly between local governments and environmental programs in FY 2011-12.
            The Senate Republican plan would divide future revenues by allocating 50 percent for the General Fund, 25 percent for local governments and 25 percent for environmental initiatives, but have not yet identified which environmental program will receive funding.
            In a press conference Wednesday, Senate Pro Tempore Sen. Joe Scarnati (R-Jefferson) threw cold water on the pending House Marcellus Shale natural gas production severance tax raising questions about the constitutionally of the vehicle used by the House, the size of the tax and the distribution of the revenue from the tax.
            "This isn't about balancing the state budget, it's about addressing environmental and local government concerns," said Sen. Scarnati.  "I think the House proposal will not pass the Senate without addressing the tax rate and distribution of funds."
            Sen. Scarnati said the House "cleverly" used an unrelated bill and turned it into a tax bill which raises significant constitutional issues.
            "It remains to be seen whether adults can come together for an agreement on this issue," said Sen. Scarnati.  "The prospects of adding days to the Senate schedule are nil."
            "We have said all along the refunding of Growing Greener is a priority for the Senate," said Sen. Scarnati.  "We've said all along the major priority for a severance tax is local share and environmental programs."
            Video of Sen. Scarnati's comments is available online.
            Senate Majority Leader Dominic Pileggi (R-Delaware) said on a PCN call-in show Wednesday the Marcellus Shale natural gas severance tax proposal passed by the House is not acceptable to Senate Republicans, but at the same time said some additional work could yield an acceptable result.
            Sen. Pileggi said even Gov. Rendell felt the severance tax rate in the House proposal is too high.  He said the distribution of the resulting revenues gave too much to the General Fund noting the priority needs he said were for local governments and to fund environmental programs.
             In response to a PCN caller, Sen. Pileggi expressed concerns about the constitutionality of the vehicle the House choose to amend with the severance tax that he said could subject the tax to legal challenge.
            Sen. Pileggi said he met today (Wednesday) with House Leadership to discuss the issue and made a pledge to them to work toward a solution on the severance tax.
            On transportation funding, Sen. Pileggi said again the issue should be something the new General Assembly and new Governor should address.
            Sen. Pileggi also said the Senate will not return to voting session after the election to consider legislation.
            Senate Democrats
            Sen. Jay Costa (D-Allegheny), Minority Chair of the Senate Appropriations Committee, urged Senate Republicans to honor their promise and negotiate a fair and responsible gas drilling extraction tax that generates the necessary revenue for state, local and environmental programs.
            “Senate Democrats stand ready to support a reasonable severance tax that also addresses public safety and environmental protection concerns,” said Sen. Costa. 
            “We know there are differences between the House plan and what Senate Republicans have proposed.  We know that we have disagreements, but we also know that all of the legislative leaders gave their word that we would enact a new energy severance tax by October 1."
            Democrats have expressed concern that a Senate Republican extraction tax proposal would not be sufficient to fully address local and environmental concerns.  The Commonwealth cannot afford another giveaway to wealthy energy companies.  
            The Senator reiterated his view that the initial plan advocated by Senate Republicans is rife with “gaping loopholes and exemptions that would render the tax virtually meaningless.” 
            “Pennsylvania needs a fair tax plan that allows drilling to proceed, and ensures it can continue to grow as an economic generator and provide new employment opportunities for commonwealth residents.  It must also ensure important environmental protections, respect for the rights of local communities, and provide fair compensation to the commonwealth, local governments, and environmental programs.  We should not let the Senate Republicans off the hook.  We must honor our commitment to address this issue now,” Sen. Costa said.
           NewsClips: Rendell Sets Severance Tax Markers
                                Governor Opposes Gas Give-Away
                                Gas Industry Split Over PA Severance Tax
                                House Passes High Natural Gas Tax
                                House Passes Shale Gas Production Tax
                                House Passes Marcellus Shale Gas Tax
                                House Votes For Tax On Shale Drilling
                                House Approves Severance Tax Bill
                                Natural Gas Tax Debate Heats Up As Deadline Nears
                                Gas Drilling Tax Passes House, Iffy In Senate
                                GOP Derides Gas Extraction Tax Passed By House
                                Scarnati: House Marcellus Shale Tax Bill Has Serious Flaws
                                Scarnati: House Marcellus Tax Proposal Too High, Deadline Not Met
                                Senate Leader Calls House Severance Tax Figure Ridiculous
                                Corman: Proposed Drilling Tax Unconstitutional
                                Harper Amendment Helps Pass Marcellus Shale Tax Bill
                                Op-Ed: Marcellus Gas Tax Will Help Growing Greener Fund
                                Corbett Says Programs Could Be Cut To Reduce State Spending
                                Jack Wagner: Worst Fiscal Crisis In State History On Horizon

10/4/2010

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