Baker opposes tax on natural gas drilling industry

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Published: September 30, 2010

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In a news release, state Rep. Matt Baker (R-Bradford/Tioga) said on Wednesday that he was "standing firm" in opposition to the House Democrat proposed severance tax on the natural gas industry, which he said "would hinder industry growth and kill job creation efforts."

Senate Bill 1155 would create the highest tax in the nation among shale producing states, he said.

The news release continues:

The House Democrat proposal would institute a severance tax of 39 cents per thousand cubic feet of natural gas extracted, which amounts to a tax of nearly 10 percent. This would make the natural gas industry in Pennsylvania the highest taxed in the nation when combined with the high rate of Pennsylvania's Corporate Net Income Tax, Capital Stock and Franchise Tax, and Sales Tax. Furthermore, the tax could increase due to the rise of natural gas prices, but would never drop below 39 cents per unit even if gas prices fall.

"As a member who represents a district that contains two of the highest producing wellheads in the state and has thus far benefitted from an increase in employment opportunities, as well as money brought into the region through greater economic development derived from natural gas industry-related businesses, I am strongly opposed to a tax that will surely create massive setbacks to job creation and economic development," Baker said in the news release. "The natural gas industry and related businesses are already producing a windfall for the state and creating jobs at record levels without state subsidies, bailouts, loans and tax credits."

Baker noted that higher taxes on natural gas industry producers will surely result in higher natural gas prices and heating bills for consumers. The severance tax will also have a negative impact on landowners who receive royalty payments from their leases, thereby reducing their ability to make the amount of money due them from the contracts they signed. Landowners have a constitutional right to derive income from their property.

"This is obviously nothing more than a way to raise money for the General Fund while allocating very little money to our local governments to help them deal with the impacts of the industry, such as needed infrastructure improvements," Baker said in the news release. "It is no wonder that most elected township officials have opposed this legislation."

Baker said the Pennsylvania Farm Bureau, the Pennsylvania Chamber of Business and Industry, the National Federation of Independent Businesses, the Pennsylvania Association of Township Supervisors, the Pennsylvania State Boroughs Association and the County Commissioners Association of Pennsylvania also oppose this tax increase measure.

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