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Pennsylvania’s severance tax

Hydrocarbon Engineering,

A new study from Natural Resources Economics Inc., released by the Associated Petroleum Industries of Pennsylvania (API-PA) has said that taxing a highly productive industry that supports thousands of jobs and generates billions in economic output and millions in tax revenues has negative economic consequences for the Commonwealth of Pennsylvania.

The report

‘The Economic Impacts of the Proposed Natural Gas Severance Tax in Pennsylvania,’ analyses the impact of Gov. Wolf’s proposal to implement an additional natural gas severance tax. Proposals include adding 5% on the gross market value of production plus a fixed fee of 4.7 cents/thousand ft3 produced and establishing an artificial floor of US$2.97 /thousand ft3 regardless of the actual price of natural gas.

Pennsylvanian oil and gas

The US oil and natural gas industry delivers hundreds of millions of dollars to the Commonwealth. The current local impact tax, which is collected from every shale drilling site in the state, has distributed more than US$360 million to communities since 2012, including more than US$224 million just in 2014. That’s on top of over US$2.1 billion in state and local taxes already generated by the industry.

Under Pennsylvania law, the passage of a new severance tax would repeal the existing natural gas impact fee. Investment and production losses resulting from a new tax could lead to cumulative losses of over US$20 billion in value added or gross state product to the Pennsylvania economy from 2016 – 2015, according to the study. By 2025, supported employment in the state could drop by nearly 18 000 relative to projected levels without the tax. The relatively high paying construction and oil and gas sectors would be hardest hit.

Edited from press release by Claira Lloyd

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