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A decade later, drilling tax still roils Pennsylvania politics

November 24, 2017 News Extra

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HARRISBURG, Pa. (AP) — A decade after energy companies began realizing the explosive economic potential of the vast Marcellus Shale natural gas reservoir, the politics of taxing it still roils Pennsylvania, now the nation's No. 2 gas state.

Democratic Gov. Tom Wolf made taxing Marcellus Shale production a centerpiece of his successful 2014 campaign, and it stands to be prominent in next year's re-election bid after three years of pressing the Republican-controlled Legislature to make multibillion-dollar exploration companies pay their “fair share.”

It's closer than ever: tax legislation passed the Senate in July, and a similar bill underwent two days of debate this week in the House of Representatives, where Republican leaders oppose it. Still, any final vote will won't occur before December, and the bill may not survive opponents' efforts to attach provisions that will split supporters.

A tax was first proposed in 2009 by then-Gov. Ed Rendell, a Democrat.

Three years later, Republicans brokered a deal among themselves for a per-well “impact fee” designed to satisfy calls for a tax and the anti-tax politics of then-Gov. Tom Corbett, a Republican. The fee has produced an average of about $200 million annually, most of which returns to drilling communities.

Fights over the industry's practices and pipelines have flooded courts and shaped local races. The tax debate also has inflamed geographic differences, with southeastern Pennsylvania Republicans joining Democrats largely from eastern districts against much of the rest of the state.

Critics say the fee packs a relatively paltry tax rate when natural gas prices aren't rock bottom. Exploration companies in Texas pay substantially more in natural gas taxes, although industry lobbyists in Pennsylvania argue that prices there are higher.

Still, many western and northern Pennsylvania lawmakers fear an economic hit to their districts, where landowners reap royalties and business owners from landscapers to heavy equipment dealers benefit from drilling industry needs.

“You can see it when you drive into my district,” said Rep. Tedd Nesbit, R-Mercer, describing the money flowing to farmers who lease their land.

“There's new silos, new combines, and that money was spent locally.”

Whether or not it passes, a tax remains popular in opinion surveys and promises to be grist on next year's campaign trail. Supporters contend that, the sooner a tax passes, the sooner the industry will benefit from financial predictability after years of political football.

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