Ding Dong the Tax is Dead

Maybe they'll up with something reasonable after the elections...

 

"Gov. Edward Rendell declared the natural gas extraction tax dead, for now.  In comments to the media Thursday, the Democrat governor largely blamed Republican legislative leaders for refusing to negotiate in good faith."

 

http://www.pocononews.net/news/2010/October/22/22Oct10-2.html

 

 

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Permalink Reply by matthew h mcsparren on October 23, 2010 at 7:43am
if pa enacts an extraction tax, i would hope they would make the land owner exempt. for example if a royalty owner is paid 15% of a well making 1000mcf a day they would owe the state $21,352.00 a year if taxed at a rate of 0.39 per mcf.
Permalink Reply by Bryan D. Huwar on November 18, 2010 at 11:03am
That is a lot of bling! I agree that making the landowners exempt from such a tax would be excellent, but a few thoughts come to mind in regard to the chance of that happening - snowball's chance in hell, when pigs fly, when hell freezes over, ghost of a chance, slim to none, one in a million, uh, trillion . . . .
Chip NorthrupPermalink Reply by Chip Northrup on November 2, 2010 at 10:35am
Pa. and NY are two of only 3 states without a severance tax. Every other state has one, except Iowa, where it's irrelevant. So NY and Pa. receive no direct revenue from production. And the state income tax is easily "gamed" - ie. avoided, by producers, who can simply book the sale of gas (and recognition of revenue) out of state in a lower tax location. Leaving only the ad valorem property tax to capture some tax revenue off of a steep decline curve - which is notoriously hard for property tax to do. Net effect is that the counties are underfunded on repairs, and the state is underfunded on regulation, repairs, the works. There's one plausible explanation for this - somebody in the legislature has been bought off.
Chip NorthrupPermalink Reply by Chip Northrup on November 2, 2010 at 5:23pm
All oil gas companies pay a severance tax in every other state and country that they do business in. The only exceptions are Pa. and NYS. So it is a cost of doing business in all their business models and capital budgeting studies. No a deal killer anywhere else. The fraction that the severance tax represents is trivial compared to the lifting costs and price of gas - and it does not keep them out of all the other states. Only question is a matter of the rate. What was proposed in Pa was a bit rich compared to other states. So need to revisit that.

What out of state producers can do is game/ avoid the income tax system in NYS - since they are not (corporate) domiciled here and can book the recognition of revenue in a lower tax state - which would be all 49.

Discussed in more detail in Horizontal Hydrofracking of Shale in New York on
http://www.otsego2000.org/
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