Drilling Tax Should Support Priorities Pennsylvanians Most Care About

The Pennsylvania House may vote next week on a drilling fee plan that asks Marcellus Shale drillers to pay significantly less than they pay in major energy-producing states like Texas and Arkansas.

HB 1950, supported by House Republican Leadership, would assess the equivalent of a 1% rate over the life of a typical shale well, according to an analysis by the Pennsylvania Budget and Policy Center. Other tax and fee plans before the Pennsylvania Legislature would assess effective rates of 3.1% to 4.7% over the life of a typical well.

By comparison, drillers pay effective drilling tax rates of 3.4% in Arkansas, 5.4% in Texas and 6.1% in West Virginia on comparable deep gas wells.

“The House bill sets a fee that is much lower than drillers pay in most other energy-rich states,” said Sharon Ward, Director of the Pennsylvania Budget and Policy Center. “Drillers in Texas, for example, would pay five times more in drilling taxes on a comparable deep gas well than they will in Pennsylvania.”

HB 1950 is modeled on Governor Tom Corbett’s Marcellus fee plan. It would collect $160,000 over the 50-year life of an average Marcellus gas well, which is projected to generate $16 million.

Other drilling tax and fee plans would assess effective rates closer to those in other energy-rich states. Republican Senator Joseph Scarnati’s fee plan (SB 1100) would assess the equivalent of a 3.1% rate, raising $505,000, while Republican Representative Marguerite Quinn’s fee plan (HB 1700) would assess the equivalent of 4.4%, raising $710,000.

A House bill sponsored by Republican Representatives Gene DiGirolamo and Tom Murt (HB 1863) would assess a 4.7% drilling tax, raising $770,000 over the life of a typical well. Unlike the fee plans, the Murt-DiGirolamo drilling tax provides resources to early childhood education, job training, and support for people with disabilities and victims of domestic violence, as well as the environment and local communities.

Other shale gas-producing states ask more from drillers than HB 1950, Ward noted. Arkansas assesses a 3.4% effective rate on comparable wells (raising $555,700); Texas assesses a 5.4% effective rate ($878,500); and West Virginia assesses a 6.1% effective rate ($993,700).

“A drilling tax or fee should support the priorities Pennsylvanians most care about,” Ward said. “At a time when huge cuts are being made to our children’s education and tens of thousands of struggling Pennsylvanians are losing their health care, Pennsylvanians want to take a different course. They want to see drillers pay a tax that supports these priorities, protects the environment and helps impacted communities pay for the damages caused by drilling.”

The Pennsylvania Budget and Policy Center is a non-partisan policy research project that provides independent, credible analysis on state tax, budget and related policy matters, with attention to the impact of current or proposed policies on working families.