Business leaders wary of proposed severance tax
OAKDALE – The atmosphere was electric as House Speaker Mike Turzai kicked off a Friday forum on energy.
“With our sizable reserves of natural gas, our manufacturing base and the number of small businesses involved, Pennsylvania has the opportunity to not only be a national energy leader, but an international leader,” said the Republican state representative from Bradford Woods.
“We need to develop energy in Pennsylvania and use it here.”
Turzai was host of “Broadening the Energy Industry in Pennsylvania: Downstream Benefits of Natural Gas on Our Economy and Community.”
The conference at Pittsburgh Technical Institute wasn’t nearly as cumbersome as the title, a thought-provoking 2 ½-hour event featuring three panel discussions, 11 Pennsylvania legislators and vocal volleys aimed at the proposed severance tax.
One panel was a mini-who’s who of Washington County industry – four executives whose companies have benefited from Marcellus Shale development.
The severance tax was a frequent focus. Gov. Tom Wolf proposed that during his successful election campaign, and it is now part of his proposed budget.
The tax, as now written, calls for a 5 percent surcharge on the output of natural gas from unconventionally drilled wells – those that employ hydraulic fracturing, or fracking.
Many believe that if that tax is enacted, it would imperil the impact fee program created by Act 13 in 2012, which provides funding to counties and municipalities where drilling occurs.
“The severance tax scares me,” said Paul Battista, business development manager for SunnySide Supply, a Slovan-based supplier of gas and oil services. “Our company plans well, but how are our clients planning? This could knock the legs out of industry, knock the legs out of companies that wouldn’t be able to pay bills.”
Battista also is chair of the Municipal Authority Board of Mt. Pleasant Township.
His panel was the second to share the dais, with the group addressing the subject, Small Business and Local Impacts. Battista was joined by Mark Caskey, president of Steel Nation; Dawn Fuchs, president and CEO of Weavertown Environmental; and Frank Puskarich, owner of Hog Fathers restaurants.
Caskey was animated as he talked about energy and tax proposals.
“The last time we had a national energy policy was the Nixon administration. That’s absurd,” he said, equating the situation to a political game of Whack-A-Mole.
“We have a huge opportunity,” Caskey said, “and there’s a new administration and ‘whack!'” Then you have the Obama administration and it’s ‘whack’ and ‘whack’ and ‘whack.’
“Looking at the new budget, it’s not just the extraction tax. Everything else is being moved around tax-wise. Let’s think about this industry. It’s in its infancy. Let’s do that right thing.”
Fuchs’ company, based in Carnegie, provides environmental services – many trucking-related – year-round and around the clock. Weavertown has felt a positive impact from the development of oil and gas in Western Pennsylvania.
“We want to keep this in Pennsylvania,” she said. “The future is bright, but we have to be careful.”
Puskarich, who started his barbecue business in Washington in 2007, said he has five locations and had “planned to open two more, but put that on hold” because of the severance proposal. “I want to see what will transpire with the new system.”
Marcellus Shale has treated Hog Father’s well, and vice-versa. Puskarich sends crews with food to drill sites from 11 a.m. to 1 p.m. and 11 p.m. to 1 a.m., in all weather. His food business gets a lot of positive feedback from the people in the field.
“We have never had an issue with any of these workers. These people are princes,” he said. “The oil and gas business has embraced Pennsylvania with open arms.”
Turzai praised the panel as it wound down.
“You don’t go anywhere in Pennsylvania where people haven’t been positively impacted by natural gas,” he said. Then pointing to the foursome, he added emphatically, “These are some employers who have benefited from natural gas, and there are many more. These are Pennsylvania jobs.”
The first panel spoke about natural gas vehicles, the third about petrochemical and manufacturing. Panelists included Chuck Half, a manager with VETaxi, a Pittsburgh firm with a fleet of all-natural gas taxis. It is veteran owned and operated, and has veteran drivers. One of its vehicles was in the main PTI lot.
Patrick DeCourcy, chief financial officer of ATI Manufacturing, bashed the theory that manufacturing is listing. He said it is important, especially with the transportation of gas.
“Industry has not left Pennsylvania. It is alive and well,” said DeCourcy, whose company makes steel and related products. “We’re on both sides of the natural gas issue. We’re seeing low, stable energy prices in Pennsylvania, which enables us to make other investments.”
Dennis Yablonsky, CEO of the Allegheny Conference, addressed the possibility of Dutch Shell developing an ethane cracker plant in Beaver County. The benefits could be profound, he said, but …
“You need the infrastructure to get (the gas) out and send it out,” he said. “You have to make sure you have the infrastructure that can support plants like this.”
The conference concluded a little before noon. About 150 people milling around, talking, before slowly leaving the room. The energy never did.