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Corbett Steps on the Gas

A look at proposals to tax natural-gas drilling

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So far, drilling companies have been extracting natural gas from Pennsylvania's Marcellus Shale formation without paying taxes on it. Gov. Tom Corbett has, finally, proposed an "impact fee" to compensate governments for the disruptions caused by drilling. The fee would max out at $160,000 per well … even if the well generates tens of millions in profit. 

How low is Corbett's rate? It would cost drillers less than a proposal made last year by their own trade group, the Marcellus Shale Coalition. It would also be less than the rates charged by many other states … and sought by Corbett's own fellow Republicans.

It's difficult to compare different tax schemes. Some charge a flat fee; others are based on the price of gas, which can change. Estimates also depend on guesses about how much gas a well will produce. 

But the Pennsylvania Budget and Policy Center, a liberal Harrisburg think tank, has made such a comparison. Based on GOP assumptions and historical trends, the PBPC estimates that each well will produce 3.8 billion cubic feet of gas, and that the price of gas will be $4.28 per thousand cubic feet. (That's in the ballpark of today's prices.) Such a well would produce $16.26 million in revenue for the owners. But how much would it produce for residents?

 

The Corbett Plan

 

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1 percent

Corbett is pushing a sliding "impact fee" that starts at $40,000 the first year, declining to zero after 10 years.

 

The Marcellus Shale Coalition Plan

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2.5 percent

In 2010, the industry group sought a gas tax of 1.5 percent in the first five years a well operates, rising to 5 percent afterward and then declining to zero when production decreases. 

 

The DiGirolamo/Murt Plan

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4.7 percent

GOP state Reps. Gene DiGirolamo and Tom Murt have proposed a base 4.9 percent tax on the value of gas until well production falls below 60,000 cubic feet per day.

 

The Quinn Plan

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4.4 percent

State Rep. Marguerite Quinn (R-Doylestown) has proposed a flat $50,000 annual fee, which will decline as well production drops off.

 

The Scarnati Plan

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3.1 percent

State Senate President pro tempore Joe Scarnati has proposed a base fee of $10,000 per year, plus fees based on the price of gas and well production.

 

The Rendell/West Virginia Plan

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6.1 percent

West Virginia charges a 5 percent levy on the price of gas, plus a flat fee of 4.7 cents per thousand cubic feet; former Gov. Ed Rendell proposed a similar rate for Pennsylvania.

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