HARRISBURG — Gov. Ed Rendell said he is dropping his plan to impose a tax on the extraction of natural gas in Pennsylvania.

Rendell told reporters Monday conversations with major gas producers convinced administration officials imposing such a tax at this early stage could hurt the industry. Despite the state's budget woes, he said those concerns outweighed the projected $90 million the tax would generate this fiscal year.

The 5 percent tax had won committee support in the House, but faced strong Republican opposition.

Rendell proposed the tax in February as drilling companies flocked to the state hoping to tap the potentially lucrative gas formation called Marcellus Shale.