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Update On Natural Gas Severance Tax Proposals Introduced So Far In Senate, House

Here's an update on the natural gas severance tax proposals introduced so far in the Senate and House:

Senators Hughes, Yudichak Introduce Natural Gas Severance Tax Bill

Sen. Vincent Hughes (D-Philadelphia), Minority Chair of the Senate Appropriations Committee, and Sen. John Yudichak (D-Luzerne), Minority Chair of the Senate Environmental Resources and Energy Committee, introduced the text of their natural gas severance tax bill Thursday.

Senate Bill 1333 would enact a 5 percent severance tax on natural gas production with the proceeds going to fund education, environmental and economic development.

Proceeds from the severance tax would be deposited into a new Environmental Purpose and Economic Development Fund which would be allocated to these purposes-- $150 million so natural gas drilling on state lands is not necessary, $190 million in FY 2014-15 and $250 million thereafter for economic development and job creation and the remaining funds for basic education funding.

There are no allocations to specific programs, like the Environmental Stewardship (Growing Greener) Fund, nor is there any specific language banning additional leasing of state land for natural gas drilling as some Democrats have advocated.

There is no specific language on what would happen to the existing Act 13 drilling impact fee, although Act 13 has a provision which automatically eliminates the impact fee on drillers if a severance tax is enacted.

Sen. Yudichak and Sen. Hughes originally announced their proposal in March.

Sen. Erickson’s Severance Tax Bill Eliminates Environmental Funding, Funds Education

Sen. Ted Erickson (R-Delaware) introduced Senate Bill 1349 on April 28 imposing a four percent severance tax on natural gas production and devotes all of the revenue it generates to funding basic education.

Because it includes no specific language on what would happen to the existing Act 13 drilling impact fee, a provision in Act 13 would automatically eliminates the impact fee on drillers if a severance tax is enacted eliminating critical funding for environmental programs like Growing Greener and payments to municipalities host Marcellus Shale drilling.

Sen. Ferlo’s Severance Tax Bill Offers Most Comprehensive Environmental, Local Funding

Sen. Jim Ferlo (D-Allegheny) introduced Senate Bill 1359 on April 30 and offers the most comprehensive proposal to fund environmental and other conservation programs using a new severance tax on natural gas production.

The legislation would--

1. Eliminate the drilling impact fee and replace it with a fair severance tax of $0.25 per thousand cubic feet of gas. The tax rate will adjust up as the price of gas increases and will be collected by the Department of Revenue. If the tax had been in place in 2103 it would have raised $750 million.

2. The existing funding distribution formula will remain the same for the first $200 million. All additional funding will be directed to the General Fund.

3. Require that a driller of an unconventional well provide notice to surrounding property owners and municipal officials that are within 5,000 ft of the well site prior to the well drilling permit application being submitted to the Department of Environmental Protection.

4. Utilizes the edge of the well pad as the boundary to begin all measurements for required distances for notification instead of the borehole.

5. Provides that, in a water management plan, potential damage to ecosystems and wildlife must be a consideration in the approval process.

6. Provides setbacks from the edge of the well pad of 1,500 feet from buildings, 2,500 feet from drinking water sources, 1,000 feet from exceptional value water sources, and 500 feet from any other body of water and eliminates the Department of Environmental Protection’s ability to waive these requirements. It also prohibits drilling with the boundary of a wetland.

7. Adds proximity to water sources, including trout streams and wetlands, as conditions for the DEP to consider when reviewing a well application and would further allow the Department to deny or condition the permit based on 7 possible impacts.

8. Improves the standards of drinking water that a driller must obtain to replace lost drinking water that is contaminated due to drilling activity.

9. Amends how trade secrets are handled by the Department in relation to public access.

10. Clarifies that doctors shall have immediate access to any and all information that might be related to a patient’s condition, and that the doctor is free to share that information with the patient, a county or state department of health, or other health agency or association.

13. Requires that first responders may obtain the drilling report information for any well to which they are responding in an emergency, including proprietary information, regarding the fracking solution.

14. Increases bonding requirements.

15. Increases criminal penalties related to violations of the act.

16. Deletes Chapter 33 (Local Ordinances Relating to Oil and Gas Operations) and restores zoning and land use decisions to municipalities.

17. Creates a moratorium on any additional leasing of state forest land for 2 years.

Rep. DiGirolamo Has Yet To Introduce Severance Tax Bill In House

In December, Representatives Gene DiGirolamo (R-Bucks) and Tom Murt (R-Montgomery) working with Representatives Harry Readshaw (D-Allegheny) and Pam DeLissio (D-Montgomery) announced a severance tax proposal that would impose a 4.9 percent severance tax on natural gas production to replace the drilling impact fee enacted in 2011.  The actual legislation has not been introduced yet.


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McCord Says Higher Natural Gas Tax Makes Sense


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