Pennsylvania Senate Proposes Natural Gas Severance Tax
Pennsylvania, the second-largest natural gas producer in the US after Texas, is considering a new revenue stream. The state's Senate has proposed a severance tax on natural gas production, a move that could significantly impact the industry and local governments.
The proposed tax, passed in the Senate's budget, varies depending on the Henry Hub spot price of natural gas. It would be levied in addition to the existing Impact Fee, ensuring local governments continue to receive compensation for drilling effects. If applied to Pennsylvania's FY 2013 production, a tax of $0.025 per mcf would raise revenue to 3.0% of production value.
Severance taxes are common in the US, used to raise revenue from non-renewable resource extraction. While the impact on Pennsylvania's government revenues and investment climate is uncertain, experts suggest it might not be significant due to the productivity of the Marcellus shale.
Pennsylvania's Senate has approved a severance tax on natural gas production, a first for the state. The tax, which varies based on gas prices, is unlikely to have a major effect on revenues or investment climate, but its impact on producers and public finances remains uncertain.
