Here is a piece about the gas industry and taxes that comes from Penn Futures.
Tomorrow brings the annual income tax deadline, and the media will
predictably cover those who complain the loudest about having to pay
taxes. But all the sound and fury misses the point – most citizens
regard paying taxes as their civic duty, but are disturbed by the lack
of fairness in the system.
In Pennsylvania, the folks complaining the most about paying taxes are
the Marcellus Shale gas drillers and their friends. These multi-
national corporations, which include CONSOL Energy and ExxonMobil, are
crying poor, claiming that charging them an extraction fee on the
liquid gold they are taking from our land would destroy an “infant”
Of course, the fee is one these same corporations happily pay in other
states. Out of the top 15 natural gas producing states, Pennsylvania
is the only one that doesn’t have a fee to compensate for the loss of
our natural resources and help fix the scars of extraction. An impact
fee (also called a severance tax) identical to the one in place in
West Virginia since 1987 would raise more than $100 million a year
initially, rising to more than $630 million annually
Pennsylvania is ideally situated close to large markets, and since the
cost to transport natural gas constitutes at least 40 percent of the
price consumers pay, Pennsylvania gas is among the most profitable in
the country for the drillers. Even with an impact fee, Pennsylvania
gas will still be a bonanza for the gas drillers.
Nevertheless, the drillers and the Pennsylvania Chamber of (some)
Business and Industry still cry. “We already pay way too much tax. We
have to pay this state’s awful corporate net income tax and adding a
new tax will kill our ability to create jobs.”
But not so fast. The multi-national energy companies rushing to drill
here aren’t dumb, and they can legally avoid the corporate net income
tax by simply choosing a particular corporate structure – a limited
liability corporation – or incorporating in the state of Delaware, a
tax avoidance move known as the Delaware loophole. In fact, 71 percent
of companies doing business in Pennsylvania paid zero corporate net
income tax – nada – last year. And 79 percent of the remaining
companies paid less than $10,000 each. So our current corporate tax
scheme in no way can be described as “job crushing,” as these multi-
national behemoths allege.
Without an extraction tax, the drillers get to take all the profits,
but local communities and our environment are left holding the bag.
Natural gas extraction imposes heavy costs on our communities and
environment – pipelines, drilling pads and wastewater storage pits
altering our landscapes and fragmenting wildlife habitat, heavy rigs
damaging our roads, billions of gallons of water taken from our
streams and operational errors contaminating our land and drinking
Some of the money raised from a natural gas extraction tax could be
used to offset these costs, going back to the communities that “host”
the drilling operations. It could also be invested in watershed
restoration and protection, habitat conservation, public access to
outdoor recreation, and conservation of open space and farmland. This
can be accomplished by directing a portion of the tax to the
Environmental Stewardship Fund (Growing Greener) as well as the
Pennsylvania Game Commission and Fish and Boat Commission for habitat
improvement and public access purposes.
Passing an extraction tax to help pay Pennsylvanians for the use of
our resources and to pay for the damage left behind by the drillers
would go a long way to making our tax system fairer, which is what
most taxpayers want more than anything – especially on April 15.