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House of Representatives
Session of 2017 - 2018 Regular Session


Posted: June 21, 2017 02:06 PM
From: Representative Madeleine Dean
To: All House members
Subject: Severance Tax on Natural Gas Extraction
In the near future I will be introducing legislation to enact a reasonable severance tax on the extraction of natural gas, a measure that is supported by the majority of Pennsylvanians.

This bill places a 6.5% severance tax on gas drilled in Pennsylvania, with revenues dedicated to education funding. The current impact fee will remain in place, and drillers will be able to deduct the impact fees from their overall severance tax liability under this bill.

Article 1 § 27 of the Pennsylvania Constitution states that Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the commonwealth shall conserve and maintain them for the benefit of all people.”

As stewards of our precious natural resources—including natural gas—we have a responsibility to ensure that all Pennsylvanians benefit from its taking, yet Pennsylvania remains the only drilling state without a severance tax.

Additionally, this legislation would clarify the definition of a “stripper well” in Act 13 of 2012. Consequences arising from ambiguity in the current act is being reviewed by the PUC and may lead to millions of dollars in lost revenue from impact fees if not remedied.

Finally, this legislation seeks to ensure that landowners with wells on their property receive the minimum royalty payments promised them under the Oil and Gas Lease Act (Act 60 of 1979).

The Oil and Gas Lease Act requires a driller to pay a landowner a 1/8 minimum royalty on the natural gas the driller severs under the terms of the lease with the landowner. Unfortunately, certain drillers have been paying less than the required minimum by deducting production and post-production costs from the price they receive from the sale of the gas they sever before calculating the royalty payment – sometimes resulting in no royalty payment at all to the landowner.

This bill—similar to other bills that have been introduced to specifically address this issue such as HB557 in the current session—would prohibit deductions from the royalty payment to ensure that landowners receive the compensation promised to them by drillers.

Our Commonwealth has been blessed with this natural resource. The extraction of natural gas from the Marcellus Shale generates tens of billions of dollars a year for the industry; it is time that we pass a reasonable severance on this valuable asset. Six and a half percent is a reasonable tax rate on this growing industry and keeps Pennsylvania competitive with other states, while bringing significant, regular revenue to education within the Commonwealth.

Please join me in co-sponsoring this important legislation.

Introduced as HB1624