Marcellus Shale Industry Doesn’t Need Extraction Tax

Jim Cawley
Harrisburg Patriot-News

One of the persistent myths about Pennsylvania’s Marcellus gas industry is that it pays no taxes and that we are all losing out on the wealth it generates.

In op-eds and comments throughout the state, the idea is being pushed that only a tax specifically targeted at this growing industry, an industry that has paid close to $1.2 billion in taxes already, will solve our financial and even environmental worries.

That just isn’t so.

Let’s consider a few of the arguments as they were presented recently.

I have read that the Marcellus Shale Commission’s recommendation of an impact fee, targeted to the communities directly affected by Marcellus drilling, is “unfair to everybody else in Pennsylvania.” Why should people unaffected by drilling collect on an impact somewhere else? Should part of Philadelphia’s wage tax go to Pittsburgh? When a house burns down in Scranton should someone in York share the insurance settlement?

When are we going to see through the silliness and recognize that the Marcellus industry is benefiting everybody the way other industries do: by lifting the overall economy.

One deceptively easy argument tax advocates have made is that the gas is there, and it’s not as if the companies can move to North Carolina and drill it. They have to drill here eventually. That’s true. And it’s also true that, at slightly more than $4 per million BTUs, natural gas is selling at record lows, in part, because it is now so plentiful.

The reason drillers are drilling now is that we have kept out of the way by not specifically targeting a single industry — theirs — with a tax no other industry in the state has to pay.

By drilling now, they have produced billions of dollars in payroll. They have created tens of thousands of new jobs and have helped to keep the state’s unemployment rate a full percentage point below the national average. Our goal isn’t simply to get them to drill now, but to make Pennsylvania the hub of the industry.

They can drill eventually, but Pennsylvanians need the jobs now.

And, contrary to the implications critics make, the Marcellus industry has generated more than $1 billion in corporate, sales and personal income tax revenues to Pennsylvania in the last five years, with most of it coming in the last 18 months.

That’s economic growth and it is what generates wealth in a way that a tax targeted at a specific industry will not. The rhetoric of the extraction tax advocates is reminiscent of the fraught predictions of a decade ago about how casino gambling would eliminate property taxes, fund our schools, pave our roads and maybe improve the weather.

Promoters spent that money a dozen ways before the first casino was opened. They’re doing the same thing now with their mythical extraction tax.

Tax enthusiasts also make the claim that Marcellus poses an imminent environmental danger to the rest of the state that, for some reason, can only be solved by a tax. What will protect the state’s environment is aggressive and impartial enforcement of environmental regulations.

This year, the Department of Environmental Protection levied more than $1 million in fines against a single drilling company for environmental violations. Taxes don’t stop pollution. Environmental enforcement does.

And, too often, we’ve seen what happens with tax money.

Think of the Capitol as a long, Velcro tube. Blow $200 million into one end and wait on the other. In all likelihood, half of it would arrive on the other end. The rest would be caught like lint on the pet programs and political perks of special interests whose agendas have little to do with the idea of commonwealth.

It is common politics. The Marcellus Commission’s job was to rise above that and find a way to turn our momentary good fortune into lasting economic wealth.

People need jobs, not taxes.

Jim Cawley is lieutenant governor of Pennsylvania. He chaired the Governor’s Marcellus Shale Advisory Commission.