Taxes and Regulation: The Twin Banes of Natural Gas Development

Natural gas development isn’t easy. Politicians want to tax it and regulate it. The pols are now in a bind, though, and offering to trade one for the other.

Pennsylvania’s House of Representatives continues to struggle with the funding plan needed to balance the $32,000,000,000 state budget allowed last month by Governor Wolf to come into law. To pay for it, the Senate agreed for the first time to impose a mineral extraction tax. In return the Senate gave some permitting relief to the natural gas industry. The House has not presented its plan, but as the days drift on it looks more and more possible that they could follow the Senate regarding an extraction tax. They don’t seem to have many other options.

In all the discussions of the extraction tax, the permitting provisions often get lost.  They are very interesting, however.  The Senate bill would require the Pennsylvania Department of Environmental Protection to do three things.  First, it must contract with outside professionals to handle applications for any type of permit.  Second, it must approve or deny permits within the mandated time periods, and limit the ability of the regulators to “restart the clock” by kicking the permit application back for more information.  Third, it would create a panel with veto power over any new permits being written by the DEP to impose limits on methane emissions at natural gas wells and transmission sites.

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