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Why Wolf faces bipartisan opposition to natural gas severance tax in southwestern PA

J.D. Prose
Pennsylvania State Capital Bureau

Gov. Tom Wolf has again proposed a severance tax on natural gas in Pennsylvania and, just like in years past, its prospects in the state Legislature appear bleak.

“I would be surprised if it got serious consideration in the House of Representatives,” said state Rep. Josh Kail, R-Beaver County. “In my estimation, it’s dead-on-arrival.”  

Kail, whose district includes gas drilling areas in Washington County, was one of 20 Republican legislators from gas-rich southwestern Pennsylvania who told Wolf in a recent letter that his “tired” and “job-killing” severance tax would not only hurt a struggling industry, but also hinder COVID-19 vaccination efforts.  

“We share your commitment to protecting the health of all Pennsylvanians amid the COVID-19 pandemic,” the state representatives said in a letter.  

“However, at a time when we should be prioritizing vaccine distribution and discussing how to bring critical PPE and pharmaceutical manufacturing back to the U.S. and specifically to Pennsylvania,” they said, “you continue to push your same tired severance tax proposal that Pennsylvanians have rejected every year that you've been in office.”

Kail explained that natural gas is the feedstock to create polyethylene products, such as what will occur at Shell Chemicals’ $6 billion plant in Kail’s area of Beaver County, which are then used to make plastics, such as COVID-19 personal protective equipment and other medical equipment.

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Impact on PA region raised as concern

“In my estimation, it’s dead-on-arrival," Beaver County Republican state Rep. Josh Kail said about Gov. Tom Wolf's proposal for a severance tax on natural gas to fund his budget initiatives.

Wolf wants to use severance tax revenue to help fund his four-year, $4.5 billion Restore PA initiative, a sweeping infrastructure proposal, and a $300 million Back to Work PA plan to spur job growth in an economy wracked by the pandemic.  

But opposition to a severance tax is bipartisan in southwestern Pennsylvania, where a once booming industry has taken a nosedive amid a market glut and falling natural gas prices.

The gas industry, though, still provides optimism in many areas that have been desperate for good-paying manufacturing and industrial jobs since the collapse of steel in the 1980s.  

According to the environmental group Food & Water Watch, there were about 26,000 fracking-related jobs in Pennsylvania between 2016 and 2018.

"The employment benefits of fracking have been overhyped to manipulate the public and policymakers," states a March 2020 paper from the group titled, "Phantom Jobs: Fracking Job Creation Numbers Don’t Add Up."

However, the industry has countered that those figures do not account for the indirect jobs that rely on the natural-gas industry, ranging from chemical companies to gas station workers. 

In a statement last week criticizing Wolf’s proposal, the American Petroleum Institute’s Pennsylvania chapter cited a 2019 consultant's study that identified 500,000 direct and indirect jobs in the state’s oil and gas industry with an average salary of about $120,000. 

Those lofty figures are why Wolf’s severance tax requests fall on deaf ears among Republicans and Democrats alike in southwestern Pennsylvania, where economic development has been a perpetual issue for 40 years.

Opposition to severance tax from PA lawmakers 

FILE - In this Nov. 4, 2020, file photo, Pennsylvania Gov. Tom Wolf speaks during a news conference in Harrisburg, Pa., regarding the counting of ballots in the 2020 general election. Facing a deep, pandemic-inflicted budget deficit, Gov. Wolf will ask lawmakers for billions of dollars funded by higher taxes on Pennsylvania's huge natural gas industry for workforce development and employment assistance to help the state recover.

Late last month, four House Democrats from southwestern Pennsylvania, a rarity nowadays, joined in a statement calling a severance tax “misguided” and a “nonstarter” in the Legislature, and they made a similar argument as their Republican colleagues about the natural gas industry’s role in fighting the pandemic. 

“This industry was deemed an essential industry by Governor Wolf last year, has produced the materials to manufacture the PPE that allowed us to respond to the pandemic, and is now producing the byproducts that are fueling the manufacturing, storage and distribution of the vaccine to Pennsylvanians,” read the statement from Democratic state Reps. Pam Snyder of Fayette County, Rob Matzie of Beaver County; Chris Sainato of Lawrence County and Frank Burns of Cambria County.  

A MarkWest Liberty natural gas pipeline and fracking well cap is seen in Valencia, Pa., in October 2020.

Wolf has frequently argued that Pennsylvania is the only major gas-producing state without a severance tax

"Other major gas producing states like Texas, Oklahoma, Louisiana, and Alaska are collecting billions from the oil and gas industries to help fix roads, build schools and keep taxes low," according to his budget plan released Feb. 2.

Kail said Wolf's argument is a "red herring" because the state already has an impact fee charged to gas companies for drilling. 

Opposition to a severance tax is not just limited to the House.

Comments from state Sen. Camera Bartolotta, R-Washington County, reflected the strong anti-tax stance among southwestern Pennsylvania legislators in the upper chamber, too.   

“Governor Wolf continues to push for a job-crushing tax on natural gas that will hike utility bills statewide and chase away new investments in our community,” she said. 

“This approach has not worked the first six times Governor Wolf tried it,” Bartolotta said, “and it is an even worse idea now when so many Pennsylvanians are out of work and families are struggling to pay bills due to his administration’s unilateral, arbitrary restrictions on employers.” 

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