Study needed
Gov. Tom Corbett took some well-deserved criticism last year for signing into law an impact fee on Marcellus shale drilling that was well below what gas drillers pay in extraction taxes in many other energy-rich states such as West Virginia, Texas, Wyoming and Arkansas.
Former state Rep. Bill DeWeese was one of Corbett’s biggest critics, noting that West Virginia, a state one-sixth the size of Pennsylvania, would take in double the amount of severance taxes being taken in by the Keystone State.
In most states, natural gas severance taxes are typically structured as either a percentage of the sales price or as a fixed rate per thousand cubic feet (MCF) of natural gas, which is reset each year. Some states, like West Virginia, use a mixed rate of the two.
However, Pennsylvania instead assesses fees on individual wells, which results in much lower fees for drilling companies. At the time the bill was passed it was reported that the Pennsylvania fee would raise approximately $360,000 over a 20-year period. A comparable well in Texas, it was reported, would raise $878,700, almost three times more than Pennsylvania’s fee.
Now comes word that the state’s Department of Environmental Protection might not be counting all the wells in Pennsylvania, costing taxpayers hundreds of millions of dollars.
The report estimates between 15,300 and 25,100 unconventional gas wells were left off the DEP’s report last year. This means the state, county and municipal governments are forfeiting anywhere from $205 million to $303 million in fees in 2012 and up to $.75 to $1.85 billion over these wells’ lifetime, says the report, “An Analysis of Unconventional Gas Well Reporting under Pennsylvania’s Act 13 of 2012.”
It was written by Joel Gehman, a professor at the Alberta School of Business at the University of Alberta in Edmonton, Canada along with several other associates.
Gehman believes that there are 10 other shale formations that should fall under Act 13’s umbrella as unconventional formations and subsequent impact fees, adding that 1,524 spud unconventional gas wells were omitted from the DEP’s Act 13 report.
“What needed to be done was a complete analysis of drilling in Pennsylvania, and it’s clear that [the DEP] has not done that or it has not been made public,” Gehman said.
DEP spokesman Kevin Sunday defended the agency, claiming the wells not reported failed to meet the state’s criteria.
“DEP provided an accurate and complete list of wells to PUC to administer the impact fee, and Pennsylvanians are not missing out on any impact fee revenue whatsoever,” said Sunday. “The wells referenced in the report as having been omitted in fact do not meet the basic criteria for the impact fee, and the authors know this. This deliberate misinformation is nothing more than an attempt by an academic to seek publicity for himself.”
While this dispute might be dismissed by some as a war of words or a matter of semantics, nothing could be further from the truth. This is a real issue, involving possibly hundreds of millions of taxpayers dollars.
In this day and age, when every tax dollar is important, this is an issue which must be investigated fairly and thoroughly. This shouldn’t be allowed to become strictly political as both Democratic and Republican lawmakers must come together and press for a full probe into the matter. Taxpayers deserve to know the full truth about whether Marcellus shale companies are paying their full share of taxes or not. Anything less is unacceptable.