Sen. Yudichak Natural Gas Severance Tax Proposal Funds Education, Environment
Sen. John Yudichak (D-Luzerne), Minority Chair of the Senate Environmental Resources and Energy Committee, Thursday joined local leaders in education, environmental protection and business at the Northeastern Pennsylvania Industrial Resource Center to unveil details of a plan to enact fair and reasonable severance tax proposal on the Marcellus shale industry.
"In order to fully capitalize on the benefits of the Marcellus shale industry, we must have a comprehensive economic strategy in place – and that strategy needs to include a fair and reasonable severance tax," Sen. Yudichak said. "Fair taxes mean better jobs, better education and better environmental protection; and a severance tax would level the playing field for all Pennsylvania businesses to grow along with the Marcellus shale industry and ensure that we do not have to make drastic budget cuts to important state programs every June."
The plan would levy a new 5 percent tax on the extraction of Marcellus shale gas and the revenue generated by the tax would be used to fund education, protect the environment and stimulate the economy. It is estimated that the severance tax would generate $720 million in the first year alone.
Under the proposal, education would receive the largest share of the revenue generated by the severance tax, with $375 million in FY 2014-15, growing to $453 million in FY 2015-16, and more than $1 billion by 2020 dedicated to education funding. All annual increases in tax and fee collections after FY 2015-16 would be dedicated to fund education.
Roughly $195 million of the revenue in FY 2014-15, and $250 million every year after that, would be used to fund DCED programs; make infrastructure investments; fund local economic development projects and implement new tax reduction incentives to improve the local business climate.
The proposal would also make significant investments in environmental protection with $75 million dedicated to Growing Greener programs and $75 million dedicated to replace the administration's plan to allow Marcellus drilling near state parks and forest land in FY 2014-15.
In FY 2015-16 and every year thereafter, the proposal would allocate $120 million for Growing Greener programs and $30 million for other environmental programs.
Sen. John Blake (D-Lackawanna), who was scheduled to participate in the event, also offered his support of the severance tax proposal.
"Every other state with abundant natural gas resources levies a severance tax on the industry that extracts that natural resource. I believe the taxpayers of Pennsylvania are not being adequately compensated for the volume of natural gas extracted in this state," Sen. Blake added. "The industry expected a severance tax and is certainly able to pay it, provided it is reasonably and responsibly levied in a manner that does not undermine the competitive position of the industry or the state."
Sen. Vincent Hughes (D-Philadelphia), Minority Chair of the Senate Appropriations Committee, added his support.
“We need to make sure that our classrooms have all the resources necessary for our students to be successful,” said Sen. Hughes. “It’s clear that education is suffering in Philadelphia because of state budget cuts. That needs to change.”
“This plan ensures that programs that provide real opportunities to people are fully funded going forward,” said Sen. Hughes. “Our proposal also makes sure that natural gas drillers, which include some of the largest corporations in the world, are paying their fair share going forward.”
Senator Hughes’ proposal would generate far more revenue than the state currently receives from natural gas drilling. This year, Pennsylvania is only projected to receive $217 million as a result of the current drilling impact fee. The proposed legislation would generate $937 million through a combination of both the fee and severance tax.
“Pennsylvania is the only state in the nation that does not impose a severance tax on natural gas,” said Sen. Hughes. “This legislation will correct this policy failure and generate funding for critical needs, including education.”
The plan will be introduced as Senate Bill 1333.
Sen. Yudichak was joined by Mike Dziak, President/CEO Earth Conservancy; Anthony Grieco, Luzerne Intermediate Unit #18 executive director; and other local leaders in education and business at NEPIRC in Hanover Industrial Estates for the event.
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