State Treasurer Rob McCord released a plan for the taxation of natural gas as part of his policy package in his run for governor.
The plan includes a 10 percent tax on natural gas extraction, estimated to generate $1.63 billion in its first year, which would be reinvested in education.
“We’re sitting on top of one of the largest natural gas formations in the world,” said McCord. “And yet for the privilege of allowing drillers to make billions of dollars in profits from our resources, we receive less than any other state in the country. That makes no sense at all. These natural gas resources belong to the people of Pennsylvania and the people deserve to be fairly and justly compensated for allowing drillers to profit from their resources. That’s why I’m proposing this sensible plan. It does more than any other to make this a fair deal.”
In the battle for the Democratic nomination, McCord faces former Revenue Secretary Tom Wolf, former Auditor General Jack Wagner, Rep. Allyson Schwartz and former DEP Secretary Katie McGinty.
If he gets his way, it will sway more drilling away from Pennsylvania. Texas taxes NG at 7.5% maximum, with lots of loop holes making the tax effectively much lower.
Taking 10% away from the producers will significantly effect the ROR in the Marcellus. Marcellus has been a Gold Mine, very low royalties, and no production taxes so far. The royalties are set, but a 10% tax is extremely high, McCord may not get elected, so we shall have to wait and see.
PA already has an impact fee which was enacted a number of years ago in lieu of a severance tax. As for royalties being fixed, a bill was just introduced that would require a minimum royalty of 12.50% on a net basis (after deduction of post production costs) as compared to present PA minimum which is 12.50% based on gross royalties.