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Corbett, natural gas allies will square off against Democrats pushing to limit, tax fracking

By   /   October 14, 2013  /   1 Comment

By Eric Boehm | PA Independent

In a completely expected move, a coalition of natural gas drilling companies in Pennsylvania came out last week against higher taxes on natural gas drilling companies in Pennsylvania.

TO DRILL OR NOT TO DRILL: The Democratic Party of Pennsylvania is calling for a tax on the natural gas industry, while also calling for a ban on drilling in the state.

The Marcellus Shale Coalition, that industry group, on Thursday blasted plans from a variety of Democrats’ gubernatorial hopefuls who say they want to increase the taxes paid by the natural gas industry for tapping the state’s natural gas reserves. Drillers in Pennsylvania pay a so-called impact fee to the state and local governments – drillers have paid more than $400 million since the fee was imposed in 2012 – but Democrats want to increase the rate and use it to fund a range of state-level programs that have nothing to do with drilling.

“Every square inch of the Commonwealth is benefiting from this generational opportunity,” the coalition said in a statement. “It would be irresponsible and ill-advised to advance massive new energy taxes that would strike an unnecessary blow to one of our economy’s most important, thriving and promising sectors.”

It’s hardly surprising. After all, what industry would not oppose a politically driven effort to single them out for higher tax rates?

But there is more to the story, and it’s a story voters will hear plenty about in the next year.

With Gov. Tom Corbett looking like one of the most vulnerable governors in the country for the 2014 election cycle, the natural gas industry figures to be one of his most important allies.

The reason is simple: Natural gas companies have more than just rhetoric to help the embattled governor. They also write checks with lots of zeroes.

The gas industry poured more than $1 million into Corbett’s first gubernatorial campaign, and Democrats talking about jacking up taxes on their companies will only drive them further into Corbett’s corner for 2014.

Corbett’s team talks about raising as much as $30 million for his re-election effort. It’s a good bet that a sizable chuck of that amount will come from the Marcellus Shale Coalition’s members.

It’s no secret that the Republicans and the natural gas companies have forged a politically beneficial alliance.

One of Corbett’s first web ads for the new campaign is a minute-long spot entirely dedicated to promoting his message about the 200,000 industrial jobs and created by the state becoming “one of the most critical energy suppliers on the entire planet.”

The campaign of Tom Wolf, a York County businessman and former head of the state Department of Revenue, responded with a video criticizing the governor for “giving away our state’s natural resources.

And that’s the message you can expect to hear from many of the Democratic candidates over the next year, particularly as they play to their base in the primary.

U.S. Rep. Allyson Schwartz, the perceived frontrunner in the race, has called for a 5 percent tax on natural gas production.

“Natural gas resources belong to the people of Pennsylvania. Pennsylvanians deserve a fair deal and a lasting positive legacy for the commonwealth,” Schwartz said in announcing her plan. She estimates it would generate more than $600 million annually, which she intends to use for schools, roads and other things.

The two former secretaries of the Department of Environmental Protection in the race, Katie McGinty and John Hanger, have voiced support for similar measures.

Although not everyone in the field has outlined a specific proposal like Schwartz, Democrats seem determined to take a hard-line anti-fracking stance during next year’s campaign. The state party has already approved resolution in favor of banning hydraulic fracturing in Pennsylvania, though state lawmakers and the heads of several prominent unions criticized that decision and cited the “vital economic interest” gas drilling represents.

There also is the minor question of whether such a tax — to say nothing of a drilling ban — would pass the Republican-controlled Legislature. Former Gov. Ed Rendell could not get a 5 percent severance tax through the General Assembly, even when half of it was controlled by Democrats.

But that won’t stop either side from using the natural gas tax as a campaign issue.

That anti-drilling line plays well in the dark blue southeastern corner of the state, where the Democratic hopefuls will have to play to their base during the primary.

But that’s also the part of the state least affected — both positively and negatively — by drilling. It’s easy to talk up the negative consequences of drilling when you’re not in the part of the state where people’s lives have been changed for the better because of the jobs created by the industry.

“Hundreds of millions of dollars have been reinvested in local communities and Pennsylvanians are able to buy cheaper energy, which allows them to spend more on other priorities,” said Mike Barley, Corbett’s campaign manager.

Expect to hear lines like that a lot more. Especially since Corbett will have natural gas dollars gushing into his campaign accounts, funding a bevy of ads detailing the positive economic consequences of drilling.

It’s quite possible the natural gas tax will become the central campaign issue of 2014 in Pennsylvania. Corbett’s team would be thrilled if that were the case.

That’s a story the governor can tell. Whether he can win with it is yet to be seen.

But the Democrats may be over playing their hand if they assume “higher taxes on gas drillers” is automatically a winning message in Pennsylvania.

Boehm is a reporter for PA Independent and can be reached at Eric@PAIndependent.com.  Follow @PAIndependent on Twitter for more.

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Eric is a reporter for Watchdog.org and former bureau chief for Pennsylvania Independent. He lives in Minneapolis, Minnesota, where he enjoys great weather and low taxes while writing about state governments, pensions, labor issues and economic/civil liberty. Previously, he worked for more than three years in Harrisburg, Pennsylvania, covering Pennsylvania state politics and occasionally sneaking across the border to Delaware to buy six-packs of beer. He has also lived (in order of desirability) in Brussels, Belgium, Pennsburg, Pa., Fairfield, Conn., and Rochester, N.Y. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and elsewhere. He received a bachelor's degree from Fairfield University in 2009, but he refuses to hang on his wall until his student loans are fully paid off sometime in the mid-2020s. When he steps away from the computer, he enjoys drinking craft beers in classy bars, cheering for an eclectic mix of favorite sports teams (mostly based in Philadelphia) and traveling to new places.

  • “Doc’

    Once again, Democrats come up with a plan to tax everything that moves, without thinking that it’s the end consumer (in-state, and out-of-state) who ultimately pays.

    Why should an “out-of-state” consumer (especially those who visit or are employed within those major urban centers on the state’s fringes, or for that matter, the balance of the country who might benefit from the garnered energy) pay for “in-state” schools, and “other things” (not defined) into a general treasury “slush fund?” Should Pennsylvania tax end users in other nearby states who would use their energy sources? Would that be controlling interstate commerce, requiring Congressional oversight??

    While I would agree to an environmentally-sensitive plan to control precious lands from any issues resulting from fracking, the Democrats would allow giving on the one hand (jobs) but take away with the other (taxes, fees)–hardly a recipe for success.

    Again, absolutely NO long term analysis was completed, just a knee-jerk reaction to claim additional tax revenue. Instead, we have plans developed only to satisfy short term (read: political) benefits. The advice here is to THINK LONG TERM!!

    Frankly, consumers and property owners are quite exhausted of all the taxation and fees being promoted, mostly by Democrats…

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