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Senate GOP leader: Shale tax may be considered with offsetting legislation | TribLIVE.com
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Senate GOP leader: Shale tax may be considered with offsetting legislation

Brad Bumsted
| Monday, July 13, 2015 4:04 p.m
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Senate Majority Leader Jake Corman, R-Bellefonte

HARRISBURG — Senate Majority Leader Jake Corman isn’t ruling out a severance tax on natural gas as a potential solution to the 14-day state budget stalemate.

Corman, a key budget negotiator, emphasized Monday he is not advocating the tax that Democratic Gov. Tom Wolf wants.

“If we can put together a package that benefits the industry, we might be willing to consider it,” Corman, R-Centre County, told the Tribune-Review on Friday.

Asked to elaborate Monday, Corman noted the natural gas industry pays Pennsylvania $225 million a year through the state’s impact fee, approved by lawmakers in 2012. With gas prices low, “we cannot take action that would damage this valuable vehicle for economic development and job creation,” he said.

“At the same time, if we could tailor a tax that may also have provisions that would allow the industry to continue to develop and maintain job growth, then it might be something we consider.”

On Monday, Republican negotiators met with Wolf but reported no substantial progress. The budget by law was due June 30.

Referring to the negotiating climate in general and public comments by both sides, Senate President Pro Tempore Joe Scarnati said, “The level of the acrimony is probably the highest I’ve ever seen.” Scarnati, R-Jefferson County, said he doesn’t want to see funding dry up for state-funded services and acknowledged a temporary stop-gap budget “certainly would be an option.”

Wolf followed Scarnati out of the meeting and told reporters: “The thing that stunned me was the speaker’s continued intransigence on the shale tax.” He was referring to Speaker Mike Turzai’s hardened opposition to a severance tax. “He’d rather do good things for his friends in the oil and gas industry than help fund our schools.”

Turzai, R-Marshall, has remained adamant that a shale tax is off-limits.

Turzai responded: “We are opposed to all of the governor’s (proposed) tax increases, the personal income tax, sales tax, cigarette taxes and natural gas taxes. His taxes would amount to $5 billion this year alone on the citizens of Pennsylvania. In (Monday’s) meeting he didn’t take a single tax off the table. I’m opposed to all. I made that clear.”

Scarnati said he opposes a severance tax. But he declined to rule it out. There’s “some level of support” in all four caucuses of both parties in House and Senate for a severance tax, he said. But there’s “not majority votes in the House and Senate Republican caucuses at this point,” Scarnati said. With the industry reeling from low gas prices, “I liken a shale tax to Detroit, during the Great Depression, putting a tax on automobiles,” Scarnati said.

Citing industry and state data, Turzai aide Jay Ostrich said, as of February, active drilling sites dropped to 45 from a high of 130 two years ago. Permits in the first half of 2015 dropped to 1,210 from 1,663 during the same period last year, and new wells are down to 420 from 642 in the first half of 2014, Ostrich said.

Stephen Miskin, spokesman for House Majority Leader David Reed, said the Indiana County Republican opposes a shale tax — though he would not rule it out.

“It’s abhorrent the administration is pushing for taxes, taxes and more taxes,” Miskin said.

Wolf spokesman Jeffrey Sheridan said Wolf “has been willing to compromise on a severance tax. The Republicans have been saying their counter is ‘nothing.’”

Many Republican reject Wolf’s idea of a “common sense” tax, patterned after West Virginia’s. Corman didn’t elaborate but said he’s talking about a lower version of the tax, not Wolf’s.

Wolf proposed a 5 percent tax on natural gas and 5 percent tax on the gross value of liquids derived from natural gas, plus a $.047 tax for each unit of gas severed at the wellhead meter.

If Republicans consider a severance tax, “They’ll want to offer some kind of olive branch to the industry,” said Steve Crawford, former chief of staff to ex-Democratic Gov. Ed Rendell. Given the opposition to a tax from Republicans leaders, Crawford said it makes sense “as a way to crack the door on discussions.”

Marcellus Shale Coaliton President Dave Spigelmyer said “higher energy taxes — especially given persistently low global commodity prices — threaten local small business, as well as union construction jobs, and undercut Pennsylvania’s ability to fully capitalize on our manufacturing potential tied to shale.”

Spigelmyer, asked through an aide what type of legislation might offset a tax, offered no examples.

The Department of Labor and Industry counts 89,314 people in the state who are employed in natural gas production, by suppliers, or at companies that serve the industry’s employees.

Spigelmyer said the governor’s energy tax won’t generate nearly the revenue that some continue to claim.

Sheridan claims the governor’s tax proposal will bring in $1 billion, money that Wolf would put toward public education. Legislative analysts dispute that amount because of low gas prices.

Industry analysts foresee a scaled-down version of the tax becoming part of a final budget package. There are many other moving parts, though, to a potential budget deal — including the level of basic education spending; whether to raise state sales and income taxes; whether to shift away from property taxes, as Wolf insists; and how to close a $1.2 billion deficit.

Brad Bumsted is Trib Total Media’s state Capitol reporter. Reach him at 717- 787-1405 or bbumsted@tribweb.com.

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