Pickett, Baker oppose gas tax bill

By C.J. Marshall (STAFF WRITER)
Published: October 2, 2010

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State representatives Tina Pickett and Matt Baker both explained on Friday why they voted against a bill recently approved in the Pennsylvania State House of Representatives which would impose a significant tax levy on natural gas production throughout the commonwealth.

The measure was approved Wednesday by the House 104 votes to 94. The bill has now been sent to the state Senate for further debate. If approved and signed into law by Governor Ed Rendell, the bill would set a severance tax rate at 39 cents per thousand cubic feet (mcf) of natural gas at the wellhead.

Pickett and Baker, who represent some of the richest natural gas producing areas in Pennsylvania, gave their reasons on Friday on why they voted against the severance tax bill. One of the main reasons cited by both representatives is the amount of tax revenue earmarked for areas producing natural gas would be insignificant compared to the amount of money that would go directly into Pennsylvania's general fund.

Baker explained that various local government organizations in Pennsylvania - such as the Pennsylvania Association of Township Supervisors, the Pennsylvania State Boroughs Association and the County Commissioners Association of Pennsylvania - indicated they were in favor of a severance tax as long as local municipalities were guaranteed 30 percent of it as fair share. Under the terms of the bill approved by the House, Baker said, local governments would only realize about 7 1/2 percent of the money, with the rest going to the state's general fund.

"This is very, very little money," Baker explained. "The bill is fatally flawed."

Pickett said that if the bill passes, Pennsylvania's severance tax on natural gas would be the highest in the nation. Pickett said she believes this would discourage further natural gas development in Pennsylvania, and ultimately be bad for business as a whole. Baker echoed Pickett's comments, explaining that the rate of 39 cents mcf would be almost 10 percent of the total income produced by natural gas. Both representatives said that this would be in addition to the taxes Pennsylvania now levies - such as the capital gains tax and sales tax.

"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 a press 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."

Pickett and Baker also pointed out that bill could be considered illegal because it originated in the state Senate, as opposed to the House. Under Pennsylvania's constitution, Baker explained, all revenue bills must originate in the House. Pickett said that the House Appropriations Committee took a Senate bill, removed the original provisions, then inserted the stipulation concerning the gas severance tax before sending it to the House floor for a final vote. Because the original Senate bill was in its third reading, Pickett said, parliamentary procedure prevented any further changes being made to it before the vote was taken. The representatives said they have spoke to state Senate members, who have expressed their misgivings because of this, and have indicated they probably won't support the bill when it comes up in the Senate.

Pickett said the Senate has three weeks to pass the bill and send it to the governor for his approval. If it does not clear the Senate in that time period, she said, the bill will be killed and the matter would have to be resubmitted for debate before a new Legislature and a new governor in January.

Baker also said there are concerns the gas companies may challenge the constitutionality of the bill in court if it is signed into law, due to how it was initially submitted and approved in the House. He pointed out that it is also against the state constitution to remove an initial proposal from a bill and insert a completely new proposal, which Baker contended is exactly what occurred when the House approved the gas severance tax bill. Pickett and Baker are certain that if the bill is legally challenged, it will be invalidated by the courts.

Baker also contended the bill would be mean higher natural gas prices for customers, which would mean higher home heating costs.

"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," said Baker in his press release. "It is no wonder that most elected township officials have opposed this legislation."

C.J. Marshall can be reached at (570) 265-1630; e-mail: cjmarshall@thedailyreview.com.

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