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Pennsylvania Senate approves major changes to Marcellus shale permitting

Published by , Senior Editor
World Pipelines,

The Pennsylvania Senate on Thursday approved a plan to eliminate a US$2.2 billion budget deficit that includes heavy borrowing and hundreds of millions of dollars in tax increases, including on Marcellus Shale gas drilling, consumers' utility bills and online purchases.

The revenue package is designed to patch a more than US$2 billion hole in the state’s US$32 billion budget for the fiscal year that began 1 July.

The legislation includes a severance tax on natural gas drilling that will generate about US$100 million per year. Gas drillers would continue to pay an existing impact fee that is split by the state government and communities in the Marcellus Shale natural gas fields.

Democratic Governor Tom Wolf campaigned for governor in 2014 on a promise to impose a severance tax on shale drilling, but energy companies have long objected to it, saying it would harm the state's competitiveness. Pennsylvania is the nation's second biggest gas producing state after Texas.


Hoping to make it more palatable to industry, the Senate approved concessions on state environmental permitting rules.

David Spigelmyer, President of the Marcellus Shale Coalition, an industry group, warned the severance tax would hurt Pennsylvania's competitive advantage and cost “family sustaining Pennsylvania jobs." Environmental advocates complained the bill guts the Department of Environmental Protection's ability to regulate polluting industries and should be challenged in court.

Consumers, not gas drillers, would bear the brunt of the Senate's taxes.

The revenue package includes US$405 million in new or higher taxes from a gross receipts tax on natural gas, electric and telecommunications bills.

The state would raise an estimated US$100 million a year by imposing a new tax of 2 cents per thousand ft3 of natural gas from the Marcellus Shale, the nation’s largest natural gas field.

A tax on natural gas utility service would be imposed at 5.7%, or US$5.70 on a bill of US$100.

To make a new severance tax on natural gas production more appealing to Pennsylvania’s shale drillers, the state Senate is offering them a few things they want: clearer permit turnaround times and a new hurdle for regulators who want to implement stricter controls on methane emissions from well sites.

Senate Majority Leader Jake Corman, R-Centre, said on the Senate floor Thursday that the permitting changes coupled with the severance tax are “significant regulatory reforms, which will help the employers in that area significantly.”

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