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Gas tax talks still mired after letters to Rendell (Pa. Marcellus Shale natural gas extraction tax)
Mainline Media/King Of Prussia Courier ^ | 10/26/2010 | Mark Scolforo

Posted on 10/28/2010 10:28:17 AM PDT by Qbert

HARRISBURG (AP) — An effort by Gov. Ed Rendell to jump-start negotiations on a tax on natural gas extraction from the Marcellus Shale formation produced no movement Wednesday after legislative leaders responded to his call for counterproposals.

The Democratic governor reacted forcefully and blamed Republicans, suggesting the already remote prospects for a deal before he leaves office at the end of this year had become even less likely.

“I am extremely disappointed in the Senate and House Republicans for failing to provide any reasonable compromise on a severance tax rate,” Rendell said in a statement. “Not only have they broken their promise to the people of the commonwealth, they have left the local governments in serious financial trouble and have robbed the state of resources necessary to protect our environment.”

The governor received letters from House Democrats and Senate Republicans, the parties that control their respective chambers, that mostly served to highlight differences that have so far prevented a deal. The letters also were a reminder that time is running out to reach an agreement this year.

Rendell had asked Tuesday for counterproposals to his most recent plan, which called for a tax rate to start at 3 percent and top out at 5 percent.

“Although your approach to have each caucus privately offer an acceptable tax rate is a novel one, we don’t believe it is a realistic way to reach accord,” wrote Senate GOP leaders Joe Scarnati, Dominic Pileggi and Jake Corman. “We are unclear whether you plan to endorse the highest proposal, the lowest one, or some combination thereof.”

They reiterated that they want the starting point of negotiations to be their previously articulated position of a 1.5 percent tax rate for the first five years, and 5 percent after that.

They also said the issue of how the proceeds will be divided between local governments and environmental needs had not been adequately discussed during negotiations.

“Until we have a clear understanding of what percentages the individual caucuses believe to be an appropriate allocation for these efforts, we cannot determine a final tax rate,” they said.

House Democrats said they preferred the tax to be based primarily on the volume of gas, not its value, to prevent swings in revenue numbers depending on the economy and market conditions. That was the structure in the tax bill that passed the House last month.

“Regarding distribution of revenue, while we can be somewhat flexible about the proportion for environmental concerns and local governments, we must be mindful of the core (principles) of those Democrats and Republicans who voted for passage of our bill,” wrote House Democratic leaders Keith McCall, Todd Eachus and Dwight Evans.

Senate Democratic Leader Bob Mellow said in a three-sentence letter to Rendell that if Senate Republicans would go along with the governor’s compromise, he would take it before his caucus members. House Republican Leader Sam Smith planned to send a response Thursday, his spokesman said.

Rendell spokesman Gary Tuma expressed concern about the legislative calendar. The two-year General Assembly term ends Nov. 30, but Senate Republicans have long said they would not return after the Nov. 2 election for a lame-duck session.

“Logistically, there’s going to be some time that’s going to be needed to get bills back and forth,” Tuma said. “The practical deadline, if not the legal one, is approaching very rapidly.”

Senate Republicans said any deal would need to be worked out ahead of a vote and address safety, zoning and other issues, and that there was still no agreement on how much of the drilling companies’ costs to get the gas to market could be deducted from a tax. They also said the House would have to act first.

House Democratic caucus spokesman Brett Marcy said it was “ridiculous” for Senate Republicans to insist on the House acting first when the House has already passed a Marcellus Shale natural gas tax.

“If the Senate Republicans are claiming that we have ruled out a return to session before the election, they are mistaken,” Marcy said. “We would return to session if we had an agreement in place with the Senate. No agreement exists and no agreement is imminent, solely because the Senate Republicans have yet to negotiate in good faith.”

TOPICS: Business/Economy; Government; News/Current Events; US: Pennsylvania
KEYWORDS: pa; rendell; tomcorbett; toomey

1 posted on 10/28/2010 10:28:23 AM PDT by Qbert
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To: Qbert

He never met a tax he didn’t like. Of course all the coverage of this fails to mention that once the tax is in place the price of natural gas will go up. They just wanna stick it to those evil gas drillers.

2 posted on 10/28/2010 10:35:07 AM PDT by ReneeLynn (Socialism is SO yesterday. Fascism, it*s the new black. Mmm Mmm Mmm.)
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To: Qbert

If this tax gets passed it will kill the gas industry in PA. There is a glut of gas on the market because of the recent success in shale gas exploration in the US. While market proximity might make for rosier economics, there are plenty of other states in the nation that would welcome the huge capital investment it takes to develop natural gas. Say good bye to all those jobs PA.

Rendell is also playing this card:

“Rendell halts further leasing in Pennsylvania state forests”

3 posted on 10/28/2010 11:00:12 AM PDT by epithermal
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To: Qbert

This bum can’t leave office soon enough.

4 posted on 10/28/2010 11:03:53 AM PDT by Antoninus (It's long past time for conservatives to stop voting for Republican liberals. Enough!)
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To: ReneeLynn
A small resource extraction tax is pretty normal. If it's too large, the Laffer curve kicks in and activity drops, so it pays for the State to keep it reasonable.

The State should be making a royalty off of gas extracted from beneath State-owned lands, and those monies can be used to pay for oversight of the industry by the State, in terms of regulatory enforcement. This isn't necessarily a bad thing, and as far as the royalties go, it is a normal arrangement which happens with any mineral rights owner.

The danger is that the folks at the Statehouse go nuts with the money and leave the State and the industry without regulatory enforcement.

The State of North Dakota has a great industry friendly setup which not only fosters industrial development but safeguards landowners, including the State. It provides reclamation oversight as well, which helps keep anyone from leaving a mess behind.

In addition, the State of North Dakota requires information and well samples from the oil companies, which has built an incredible database of information regarding the subsurface geology of the State, which the state makes available online, with full online access to individual well files after a six month confidentiality period for a very reasonable annual fee.

I know, I use the service as a geologist.

That's what can be, but it is up to the Governor, the Legislature, and the People of the State to make sure that it isn't just another revenue stream to be whizzed away.

Will a reasonable tax raise the price of Natural Gas? Keep in mind that Natural Gas, much like oil, is fungible and an internationally traded resource. The overall impact to natural gas prices would likely be very little, if any, and even local changes should be negligible.

I'd be far more worried about 'cap and trade' or any other 'carbon tax' causing price hikes than a reasonable extraction tax.

5 posted on 10/28/2010 11:27:03 AM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: Qbert

Go away, Ed. Go back to Philly and resume stuffing your face with cheesesteaks and getting made guys out on reduced bail...

6 posted on 10/28/2010 12:06:15 PM PDT by Buckeye McFrog
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