There’s wonderful news coming out of Pennsylvania’s gas fields, if you’re an investor. Range Resources is boasting about its “monster wells” that are breaking all records for production. “We believe we’ve captured a large position with stacked pay potential in the best rock in the basin,” gushed Range COO Ray Walker.
(Stacked pay potential refers to the potential to extract gas from a single well at multiple depths, in this case from the Marcellus Shale and the much deeper Utica Shale).
Meanwhile, Cabot Oil and Gas beat its revenue estimates by $47.52 million as its high producing, low-cost Marcellus Shale wells pumped out almost 480 billion cubic feet of gas this year.
And to gild the lily, the drillers paid no severance tax on Pennsylvania gas like they did in every other state in which they operate.
But the news isn’t so good for Pennsylvania taxpayers who are still reeling from huge state funding cuts to public education that resulted in the loss of 27,000 jobs, and slashed classroom and extracurricular programs. Local school districts were forced to raise hated property taxes, so homeowners ended up paying higher taxes for less education.
Governor Wolf has proposed a severance tax on natural gas production similar to the one in place in neighboring West Virginia that would generate enough revenue to restore the cuts public schools have endured. Revenue from increases in sales and personal income taxes would be used to lower property tax bills, dramatically lower for some homeowners.
Not surprisingly, the gas drillers are saying a severance tax will drive them out of Pennsylvania. They would have us believe that they will leave their monster wells in the best rock in the basin to go drill in another state that already has a severance tax.
Pennsylvanians aren’t buying that threat, and neither should members of the General Assembly.
For a PBPC review of the research literature, which finds that severance taxes do not have a substantial impact on how much drilling happens in a state, see Responsible Growth: Protecting the Public Interest with a Natural Gas Severance Tax.