IFO says severance tax may cost landowners

What to look for on Smart Talk Tuesday, March 27, 2018:

A severance tax on natural gas pumped from the ground in Pennsylvania has often been suggested as a cure — or at least a contribution — toward solving the state’s fiscal woes. During the decade that natural gas has been drilled in the state’s Marcellus Shale, estimates of how much tax revenue the wells could generate have ranged between $100 million and a billion dollars.

Pennsylvania is the only state that doesn’t have a severance tax devoted to natural gas.  However, as opponents of a tax point out, the state does impose an impact fee, designed to pay for expenses resulting from drilling and transportation of gas.  Severance tax opponents have often claimed it would reduce the number of jobs in the gas industry and perhaps even drive drillers to other states.

But it was a bit of a surprise when Pennsylvania’s Independent Fiscal Office published a report last week that said a severance tax could cost landowners receiving royalties from gas drillers tens of millions of dollars in the form of post-production costs — something that is already costing some landowners a lot of money.

The Wolf Administration disputes the IFO’s findings — saying the severance tax proposal by the governor prohibits companies from deducting tax money from royalty payments.

StateImpact Pennsylvania reporter Marie Cusick appears on Tuesday’s Smart Talk to explain what it all means for the future of a severance tax.