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Severance tax compromise deserves Wolf's attention

Finally, a reasonable compromise on taxing Marcellus Shale natural gas wells has been proposed.

And look who’s proposing it: a conservative Republican lawmaker from the heart of Marcellus territory.

State Rep. Jim Christiana, a Republican next door in Beaver County, thinks his plan will blunt the Democrats’ contention that Pennsylvania isn’t extracting enough revenue from the natural gas industry. His proposal was reported Wednesday by WITF public radio in Harrisburg.

Since 2012, the state has collected an impact fee from each Marcellus well. The fee is calculated using the age of the well and average price on natural gas.

The industry and a majority of Republican legislative leaders say the impact fee is enough. But Gov. Tom Wolf and many Democrats say the industry should pay a severance tax on the gas being produced in addition to the impact fee assessed for each well.

The Democrats point to a finding by the state Independent Fiscal Office that Pennsylvania has one of the lowest effective tax rates on gas drillers in the United States.

Recent polling also indicates most Pennsylvanians favor a severance tax — a condition that Christiana acknowledges as a motivation for his proposal.

“The Republicans have lost that public relations battle,” he said.

But Christiana doesn’s want both taxes. His plan would revoke the impact fee while imposing the severance tax. His proposal also would maintain payments to counties and regions for mitigation of the adverse effects of gas drilling and for environmental programs. The only difference is that the money would come from the severance tax revenue, not an impact fee.

Christiana’s proposal is reasonable, especially now as Pennsylvania’s natural gas industry stands at the crossroads of economic uncertainty — as energy prices and production are suppressed by a global glut. It makes more sense to tax the production and consumption of a commodity rather than taking payments on its potential while it’s still in the ground.

Wolf and the Democrats should consider what Christiana has proposed. It would maintain the impact payments while introducing a reasonable measure for taxing the revenue generated by the gas industry.

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