Oil and gas interests rail against severance tax

Lou D’Amico, president of the Pennsylvania Independent Oil & Gas Association, is absolutely sure that enacting a severance tax on oil and gas extraction would temper the growing industry, bleed tax revenue in the long run and kill jobs. Now, he said, everyone else needs to be convinced.

Pulling no punches in like-minded company at PIOGA’s Eastern Oil & Gas conference and trade show at Heinz Field on Tuesday, Mr. D’Amico said, “This whole idea is probably the prime example of what I don’t like about government.”

He was referencing a report from Pennsylvania’s Independent Fiscal Office that showed the state’s impact fee amounted to an effective 2014 tax rate of 1.8 percent, the lowest among gas-producing states.

“It’s comparing apples to oranges,” Mr. D’Amico protested.

He and others in the industry have criticized the analysis for not considering the impact of other business taxes, such as Pennsylvania’s 9.99 percent corporate net income tax, nor the state’s high compliance costs.

“We are not getting — far from it — any free ride,” he said.

But sentiment in Harrisburg may be stacked against the industry on this issue, said PIOGA’s lobbyist, Richard Gmerek, president and CEO of Gmerek Government Relations in Harrisburg.

The severance tax issue, which was tabled in favor of a flat, per-well impact fee included in Act 13 of 2012, has been resurrected by the four Democratic gubernatorial candidates, whose proposals range between a 4.5 percent and 10 percent levy on gas extraction. Gov. Tom Corbett opposes the idea but, as Mr. Gmerek noted, he has a $1 billion budget deficit to deal with.

“I think the severance tax is a huge problem as we try to do this budget this June,” Mr. Gmerek said. “I think it will be a problem through the end of the year.”

Mr. D’Amico noted Pennsylvania has never had a severance tax on mining of coal, sand or gravel, and he argued that oil and gas producers are being unfairly targeted.

Lt. Gov. Jim Cawley, who delivered the keynote address at Tuesday’s conference, all but called it a success tax. “When anyone looks at one particular industry and says, ’Ah, we should tax them because they’re successful and they create jobs,’ ” he said, “the true meaning of what it is they’re saying is you should be penalized for being successful. And that’s wrong.

“This industry is paying a great many taxes already,” he continued. “What a lot of folks in Harrisburg don’t like is that the vast majority of [impact fee] money stays where the impacts are felt. Don’t be deceived. They simply want the money in Harrisburg so they can spend it.”

Anya Litvak: alitvak@post-gazette.com, 412-263-1455.

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