Election 2014: Democrats Debate Severance Tax

  • 2014 Democratic candidates for PA Governor. Photo: Lindsay Lazarski, WHYY.

May 9, 2014

Pennsylvania voters head to the polls May 20, and Democrats will choose between four candidates who want to run against Republican incumbent Governor Tom Corbett in November. All four want to create what’s called a severance tax on drilling, but they have different on ideas on how large that tax should be.

When the Democratic race for Pennsylvania governor was gaining steam last fall, there was a  field crowded with candidates. Long time Congresswoman Allyson Schwartz of Montgomery County was already focused on the natural gas industry.

“We have a failed governor, particularly in terms of the Marcellus Shale. He’s simply been giving our natural gas away to the energy companies, and that’s unacceptable.”

At a debate in Philadelphia last January, Schwartz said gas drillers should pay for the resources they are taking from Pennsylvania.

“As governor I will institute a severance tax—5 percent, moderate, reasonable severance tax.”

More than thirty states already impose a severance tax on drilling. But Pennsylvania Governor Tom Corbett has been staunchly opposed to it. His administration helped create what’s called an impact fee on drilling.

Last year, the state collected more than $200 million through this fee, and more than half of that money went to local governments that host wells.

“I’m proposing a 5 percent severance tax, I call it, although I’m not quite sure what the distinction is between that and an extraction tax, or even the impact fee," said businessman Tom Wolf of York. According to polls, he’s leading the four Democrats who remain in the primary race. Wolf spoke recently with StateImpact Pennsylvania.

“My severance tax would be imposed as a percent of the market price at the wellhead, which I think right now is around $4 per thousand cubic feet. According to some estimates would raise something around $700 million in the first year.”

The Democratic contenders all want that money to go toward education, as well as infrastructure, and clean energy projects. In an interview with The Allegheny Front, state treasurer Rob McCord, who's also on the primary ballot, says a 5 percent tax won’t raise enough money.

“I just came to the conclusion that it was really a bad idea to send a Democrat into Harrisburg asking for only five percent. It would absolutely, provably leave hundreds of millions of dollars on the table in terms of a negotiation with a Republican leaning or an all Republican legislature. So I wanted to make sure we sent somebody in who would be asking for the right price.”

McCord is proposing a 10 percent severance tax on drillers. Critics say this is unreasonably high.

Katie McGinty agrees. The former chief of Pennsylvania’s Department of Environmental Protection is also on the ballot. Her severance tax proposal is the lowest of all the candidates, at 4.5 percent, and is similar to West Virginia’s tax on drillers.

McGinty told the Allegheny Front that her experience working in the Clinton White House and at the state level gives her a leg up in getting this kind of tax approved.

“One of the things that I think that does distinguish the candidates in this governor’s race, who has that track record of getting things done with legislators that might not want to move in that direction?  But you find a way to get it done.”

McGinty has been criticized by some for being too chummy with the energy industry. She’s the only Democrat who has taken significant campaign contributions from coal and mining companies. McGinty says she doesn’t have a personal fortune to spend on her campaign. Wolf catapulted himself to the lead with TV commercials, largely funded by a personal loan of more than $4 million.

McGinty says if she’s going to have any chance to win the primary, she basically holds her nose, and accept the checks that are offered.

“I don’t like one bit of it, but I care enough to put myself in an uncomfortable position of putting the resources together that are necessary so I have the privilege of sitting with you here today and declare to the public ‘We need a new governor.’"

McGinty trails far behind frontrunner Tom Wolf, as do McCord and Schwartz. But the latest polls show fully a third of voters are still undecided.