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Gas fee plans deserve scrutiny, comparison with other states

As Pennsylvania lawmakers move forward with an impact fee for Marcellus Shale gas wells, it’s important to reveal how those plans stack up against other states. Any fee signed into law should be fair — to gas producers and to state or local taxpayers.

Developments last week raised concerns that some gas drilling impact fee legislation leans toward industry interests.

According to analysis by the Pennsylvania Budget and Policy Center, one drilling fee bill being considered this week in Harrisburg would have gas drillers paying just 20 percent of what they pay in Texas.

The policy center notes that House Bill 1950 would charge a 1 percent fee over the life of a typical Marcellus well. Other fee plans in the Legislature would impose fees with effective rates of 3.1 percent to 4.7 percent over the life of a well.

Putting the Harrisburg proposals in perspective, the policy center notes the effective rates paid by drillers in other states — 5.4 percent in Texas, 6.1 percent in West Virginia and 3.4 percent in Arkansas.

State lawmakers must explain why HB 1950, which has the support of Republican leadership, charges a fee of just one-fifth of the Texas fee.

Suspicions were raised last week with the release of a study by Common Cause, the nonpartisan public interest group, revealing that over the past 10 years, the natural gas industry has spent $747 million across the country to influence legislation. The money is no doubt spent to influence regulations over fracking as well as the details of impact fees or extraction tax legislation.

In Harrisburg, House Bill 1950 would produce an estimated $160,000 over the 50-year life of a Marcellus well. That same well is projected by the policy center to generate $16 million in income to the gas producer.

Another impact fee proposal, Senate Bill 1100, sponsored by state Sen. Joseph Scarnati, would charge a 3.1 percent fee, raising $505,000. Another Republican bill, House Bill 1700, would charge a fee of 4.4 percent and raise $710,000.

It appears that HB 1950 would leave millions of dollars on the table, only to boost the profits of gas producers.

Why would state lawmakers do that? It seems campaign contributions and lobbying are playing a role.

The public needs to learn more about the different impact fee proposals. It’s also important for public pressure to return to a gas extraction tax, despite continued opposition to the idea from Gov. Tom Corbett, who received an estimated $1.5 million in gas-industry support in his race for governor.

Those contributions might not influence Corbett. He might have opposed extraction taxes before he received the gas industry donation. It’s also possible that Corbett is only honoring his campaign pledge to not increase taxes.

A majority of Pennsylvanians disagree, and believe an extraction fee makes sense.

Regardless of Corbett’s motivation, he and other industry backers should make their case to the public by comparing Pennsylvania to other gas-producing states on taxes, fees and regulations. That comparison should also look at state tax exemptions that apply to the industry.

Corbett makes a good point in not wanting to scare away gas producers with high taxes. Job creation and other economic benefits from shale gas production would be restrained if Pennsylvania were a high-cost environment compared with other states in the region. But Corbett and others who favor the low impact-fee plans — and also oppose a gas extraction tax — should make their case with facts.

Some tax opponents say that Pennsylvania has other taxes and fees that create an overall cost burden for gas producers that is comparable to other states. If that’s true, it should be made public in a detailed analysis.

Lawmakers have already delayed imposing an impact fee for too long. Every day without an impact fee means lost income to the state and municipalities. The same is true for an extraction tax.

But given the questions surrounding the fee proposals and the potential influence of gas industry money, lawmakers should not try to rush legislation through quickly that turns out to be a gift to their industry backers.

Any deal made in the legislature should be fair to municipalities where the drilling occurs, the state — and the industry.

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