Mar 1, 2019 3 min read

BRIDGEVILLE – A severance tax on natural gas and oil production in Pennsylvania that would generate an estimated $4.5 billion in the next 20 years could have enough support for legislative enactment, according to Gov. Tom Wolf.

“The votes are there,” he asserted during his visit Thursday to one of the local municipalities that was hit hardest by flooding in the region on June 20.

Speaking at the Bridgeville Borough Building, Wolf explained that money raised through the tax would go into a fund – an accompanying news released refers to it as Restore Pennsylvania – to assist communities in addressing issues such as disaster relief and infrastructure improvements.

“All across Pennsylvania last year, it seemed like I spent more time touring flood-ravaged areas,” the governor said. “It was the same problem. Lives were really being devastated, property being damaged, homes destroyed. And I felt in many ways like I was at a funeral, because you’d go up and say, ‘I’m really sorry for your loss. But there’s really nothing I can do.'”

A major stumbling block, he said, has to do with the amount of damage a geographical area sustains before it qualifies for Federal Emergency Management Agency disaster relief:

“Because the storms last year were so localized, we couldn’t really get to that threshold in an easy way.”

Wolf has called for a severance tax periodically since taking office in 2015, and his latest attempt is not tied to the 2019-20 state budget. As such, the Legislature would vote on the measure independent of any other action.

“It seems to me – and it seems, I think, to a lot of people on both sides of the aisle in Harrisburg – that this is a really good idea,” Wolf said.

In the meantime, Pennsylvania is the only major gas-producing state without a severance tax, which is levied on the extraction of nonrenewable natural resources that are intended for consumption in other states.

Wolf gave the example of the fossil fuel-rich northern part of Alaska.

“A barrel of oil comes out of the ground in the North Slope, comes down the pipeline to Valdez, gets put on a tanker and goes to refinery, where it’s turned into products that we use: gasoline, diesel, kerosene, plastics,” he said. “Whoever buys those products pays that tax, because it’s embedded in the cost of that barrel of petroleum. And so when we fill up our car with gasoline, we’re paying somebody’s severance tax.”

The governor acknowledged concerns about the potential adverse impact of the tax on producers.

“I’m trying to make sure that we have a very healthy gas industry here,” Wolf said. “I just don’t want to be left as the only state that we’re not trying to take advantage of this in a way that actually makes our state better.”

Regarding how much a Pennsylvania severance tax would be, he referred to it as “reasonable.” And details about how the resulting fund would be administered have yet to be determined.

“My vision is that this gets determined by the people who actually need it,” Wolf said. “I’m very open to making sure that our folks in Harrisburg, in a bipartisan way, we sit around, state and local officials, and figure out what’s the best way.”

In the accompanying release, Wolf cites five “priority infrastructure areas” for Restore Pennsylvania: high-speed Internet access; storm preparedness and disaster recovery; downstream manufacturing, business development and energy infrastructure; demolition, revitalization and renewal; and transportation capital projects.