Gov. Tom Wolf on Thursday announced plans to once again seek a severance tax on Marcellus Shale natural gas drilling, promising to use the money for disaster recovery, infrastructure and the expansion of broadband internet, among other projects.
The Democratic governor plans to approach state lawmakers with a proposal to borrow $4.5 billion over four years by selling bonds. The money would be paid back over 20 years using revenue from a severance tax, which would vary depending on the price of gas and the amount of it extracted.
“It is far past time that Pennsylvanians stop allowing our commonwealth to be the only state losing out on the opportunity to reinvest in our communities,” Mr. Wolf said. “And as long as that is allowed to continue, my vision of a restored Pennsylvania that is ready to compete in the 21st century economy will never become reality.”
The proposal drew a swift backlash from key Republican legislative leaders, who have successfully blocked past efforts to impose a severance tax. Hours after the governor unveiled his plan, GOP leaders who control the calendar in the House issued a statement saying it was riddled with bad economic ideas.
“While improving Pennsylvania’s aging infrastructure is a shared goal, it cannot come at the expense of the Commonwealth’s economy and taxpayers,” the Republican leaders wrote.
“Unfortunately, the governor has not included the General Assembly in the development of this proposal. If he had, he would know that there are not enough votes to enact a new energy tax, borrow billions of dollars and spend monies on more government programs.”
This is not the first time Mr. Wolf and the legislature have fought over a shale tax. The governor has repeatedly included a severance tax as part of his annual budget, with proceeds designated to the general fund to help pay for public education.
Each time, the GOP-led legislature has blocked the effort, often expressing fears that a tax would weaken the industry in Pennsylvania — claims that mirror those raised by some drillers.
Pennsylvania currently imposes an impact fee on shale gas wells but does not tax the amount extracted.
Natural gas drillers and their industry groups spent at least $61 million on lobbying and campaign contributions to state lawmakers between 2010 and 2017, according to an analysis by the Philadelphia Inquirer/Daily News and Pittsburgh Post-Gazette.
On Thursday, one leading industry group, the Marcellus Shale Coalition, also quickly criticized the governor’s proposal, claiming it would “cost consumers, hurt local jobs….and negatively impact investment.”
The fight over a severance tax on shale drillers has in some years contributed to protracted budget impasses.
Unlike in previous years, Mr. Wolf is not planning to incorporate the tax into his annual budget — details of which will be unveiled during an address next week — but rather is seeking to fund it separately from the main books.
“I’m not looking to make ends meet with this,” he said.
Mr. Wolf could borrow the money for the projects without the legislature’s approval but would need lawmakers to sign off on a severance tax itself. The administration said the governor would only borrow the money if the legislature approves the tax.
Asked whether there would be other ways to fund the same projects if the legislature rejects his request for a severance tax, the governor said, simply, “No.”