Killion backs bipartisan severance tax

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Sen. Tom Killion speaking Monday in Harrisburg about the severance tax proposal with Governor Tom Wolf and legislators.

State Sen. Tom Killion (R-9) yesterday joined Governor Tom Wolf and legislators in calling for a severance tax on natural gas extraction in Pennsylvania.

Killion is a co-sponsor of Governor Wolf’s bipartisan severance tax and permit reform plan that is being introduced by Senator John Yudichak (D-14) as Senate Bill 1000. Companion legislation is also being introduced in the House of Representatives by Representatives Bernie O’Neill (R-29) and Jake Wheatley (D-19) as House Bill 2253.

This legislation will implement a severance tax based on price and production factors and will have an effective rate of 4%, keeping Pennsylvania competitive with other gas producing states. According to projections, if the tax is enacted by July 1, it will raise $248 million in the next fiscal year alone.

“Pennsylvania is the only major gas producing state that does not have a severance tax,” said Killion. “This makes absolutely no sense. All Pennsylvanians deserve to benefit from this booming industry,” he added.

Killion noted that 80% of Pennsylvania’s natural gas is purchased by residents in other states and in international markets, meaning 80% of a severance tax will be paid by customers outside of Pennsylvania.

“80% of the severance tax won’t even be paid by Pennsylvanians,” said Killion. “There is no good reason why this tax should not be levied in our state,” he added.

“A severance tax will be used to fund our schools, build roads, pay for public transportation and protect our environment,” Killion said. “The time is now for a severance tax. Waiting any longer is a far too costly mistake,” he added.

The severance tax will be assessed as a fixed amount per thousand cubic feet (MCF) of natural gas severed. The per MCF rate will be determined by the average annual price of gas for the preceding calendar year according to the following schedule:

Price Range Rate per MCF
$1.00 – $3.00 4.2¢
$3.01 – $4.99 5.3¢
$5.00 – $5.99 6.4¢
$6.00 or greater 7.4¢

The proposal does not change the Act 13 impact fee in any way, and includes a hold harmless clause that will guarantee programs funded by the fee never receive less than $200 million annually.

In addition, the legislation includes provisions announced by the Governor as part of his plan to reduce permit backlogs, modernize permitting processes, and better utilize technology to improve oversight and efficiency. Such permitting reforms include: extending permit terms, allowing for the permitting of multiple wells on one well pad with one application and allowing for an adjustment to well bore location of up to 50 feet from the location initially proposed on the plat accompanying a permit application.

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