OUR THOUGHTS ON:

Pennsylvania's Governor Proposes Natural Gas Severance Tax

Energy & Resources

By Gordon Snyder

The possibility of a tax on natural gas produced in Pennsylvania has surfaced again. Proposed in Governor Ed Rendell’s speech in February 2008 as part of the then proposed Pennsylvania budget, the proposal was taken off the table last August. Although it was estimated that upwards of $100 million could be raised by taxing natural gas production from the Marcellus Shale deposits underlying Pennsylvania, it was then deemed too early to start taxing an emerging industry that could soon be putting billions of dollars into the Pennsylvania economy.

Apparently, the time may have come for the Pennsylvania legislature to consider such a tax. With current estimates indicating that the Marcellus Shale might produce enough natural gas to supply all of the U.S. natural gas needs for almost two decades, and recognizing that a significant portion of the Marcellus formation lies below the surface in Pennsylvania, a severance tax could produce a significant boost in State revenues. Governor Rendell reproposed the tax in a news release on January 14th and later to the members of the Pennsylvania General Assembly. The proposal, which carried a request for a July 1, 2010 effective date, did not contain a suggested rate of tax or updated revenue estimate. Whatever they may be, we are sure to see a hard-fought battle in the legislature if the Governor’s proposal moves forward. 

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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