Pennsylvania business groups boo energy taxes in state budget proposal

A broad coalition of Pennsylvania business groups opposes a state Senate-passed revenue plan they say disproportionately relies on taxing energy consumers and producers to narrow the state’s $2.2 billion budget gap.

In a conference call Tuesday, business, energy and manufacturing trade groups said a severance tax on natural gas production and new or higher gross receipts taxes for electricity and natural gas use would jeopardize a rare bright feature for attracting or retaining industry in Pennsylvania — low energy costs.

The groups also expressed little confidence in environmental regulatory reforms that were married to the new taxes to make the revenue package more palatable to them, saying those provisions can’t be counted on to survive expected legal challenges by environmental organizations. 

The reforms — like mandatory timelines for issuing drilling-related permits and delegating permit reviews to third-party contractors — have caused a backlash among environmental advocates.

“We are not willing to trade that at all,” said Pennsylvania Independent Oil and Gas Association executive director Dan Weaver, speaking for his association and its member companies. “Because at the end of the day, what we see happening is that [regulatory reform] component being thrown out and what you’re left with is nothing but the tax.”

A proposal that narrowly passed the Senate last month calls for an estimated $520 million in new net recurring revenue for the state general fund, with more than three-quarters of it coming from new or higher energy taxes: a new 5.7 percent tax on natural gas consumption; an increase in electricity taxes from 5.9 percent to 6.5 percent; and a new severance tax on natural gas extracted from the Marcellus and Utica shales.

The business groups said residential and commercial energy consumers of all sizes would be affected by the proposals, but large, industrial energy users will be particularly harmed.

The Pennsylvania Chamber of Business and Industry informally surveyed its members about the effects of the taxes. In the worst case, chamber president Gene Barr said, a large manufacturer said it could pay as much as $4 million more annually for gas and electricity with the new proposal.

Other, less obvious large energy users would also be burdened, said Terry Fitzpatrick, president of the Energy Association of Pennsylvania, an energy utility trade group.

The gross receipts tax proposals could mean “tens of thousands or even hundreds of thousands of dollars for the big school districts in additional heating expenses.”

The business groups spoke to reporters Tuesday but their target audience was the state House of Representatives, which has yet to take up the Senate’s revenue bills and generally has no appetite for new taxes.

“We are highly resolved that this will not pass,” Pennsylvania Manufacturers Association president David Taylor said.

It is unclear when the House might return to session to act on the bills.

Laura Legere:

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