Four Fast Facts on Higher Energy Taxes

As we continue to hear more political spin on proposals for a massive energy tax increase, it’s important to separate fiction from fact. We already know that the Independent Fiscal Office concluded – for the third straight year – that the governor’s proposed energy tax increase, for example, would give Pennsylvania the nation’s highest tax on natural gas. And, let’s not forget that the IFO also concluded energy tax increases would be shouldered by Pennsylvania families through higher energy costs.

Here are four fast facts regarding proposed energy tax increases:

FACT: Far from “reasonable,” proposed higher energy taxes would give Pennsylvania the nation’s highest tax on natural gas.

  • DOUBLE THE RATE OF MAJOR ENERGY STATES: According to the IFO, proposed tax hikes would set Pennsylvania’s natural gas tax rate at more than double that of fellow major oil and gas producing states Texas, Oklahoma and Louisiana.

(Source: Independent Fiscal Office) 

  • HIGHEST IN APPALACHIAN BASIN: If the governor’s proposed energy tax increase were implemented, for example, Pennsylvania’s effective tax rate would be 592% higher than Ohio’s and 80% higher than West Virginia’s.
  • JEOPARDIZES JOBS: Singling out one industry for a second special tax absolutely discourages investment, threatens growth, and jeopardizes jobs. Any additional or higher tax, especially as we’re beginning to see the signs of a slow, fragile recovery, would move the Commonwealth backward.
  • SEVERANCE TAX HURTS STATE BUDGETS: As Reuters reported late last year, “low oil, natural gas and coal prices will continue to put downward fiscal pressure on states that rely on those resources to fund their budgets.”

FACT: Pennsylvania taxes natural gas development with a special impact fee. 

  • $1.2B IN NEW REVENUE: Pennsylvania’s tax on natural gas development has generated more than $1.2B for the Commonwealth in new revenue since 2011. These revenues directly support communities in every county as well as critical statewide environmental and regulatory programs.
  • GENERATES MORE REVENUE THAN SEVERANCE: In 2016, Pennsylvania’s impact fee generated more revenue than the combined severance tax collections of West Virginia, Ohio, Colorado, and Arkansas, despite those states collectively producing MORE natural gas than Pennsylvania.

  • OTHER BUSINESS TAXES: The impact fee is paid on top of every other business tax – including the highest-in-the-nation 9.99% on corporate net income – levied in Pennsylvania, a state long-regarded by capital investors around the nation as one of the least competitive environments in which to do business. In addition to the impact fee, since 2008, natural gas development has generated more than $3.5 billion in business and personal income tax and bonus and lease royalty revenues.

FACT: Consumers will shoulder the burden of even higher energy taxes.  

  • STINGS PA FAMILIES: As the IFO concluded, hard-working Pennsylvania families would shoulder the tax increase through higher energy costs. 
  • UPENN: “SHALE GAS HAS BEEN A CLEAR WIN FOR CONSUMERS”: In a study out Friday, the University of Pennsylvania concludes “shale gas has been a clear win for consumers,” as residential gas bills are on average 40% lower than 2007 and the price of gas for Pennsylvania electric-power producers has fallen 79%, driving down consumer electricity prices. 
  • WAVE OF PA VOICES “PUNCH BACK”: Small businesses, local government officials and labor unions – representing tens of thousands of Pennsylvanians – continue to speak out clearly in a unified voice against job-crushing energy taxes. As Pa. Manufacturers’ Assoc.’s Dave Taylor said earlier this year: “We’re going to do whatever is necessary to convey the absolute truth of the situation that putting new taxes on this industry is going to sacrifice Pennsylvania’s future economic growth. It’s a very bad idea and it shouldn’t happen.” 8/8/17)
  • $1,200 AVG. ANNUAL SAVINGS: These reductions in Pennsylvania wholesale electricity and natural gas prices have resulted in an average annual savings greater than $1,200 per household. As the New York Times reported, these energy savings – directly tied to shale development – “should be particularly helpful to working-class families who spend a high proportion of their incomes on fuels.”
  • $9+ BILLION IN NEW INVESTMENT: As a result of local, abundant natural gas, Pennsylvania has seen more than $9 billion of new investment – representing over 5,000 jobs – in natural gas power plants. Collectively, these facilities represent more than 10,000 megawatts – which can power millions of homes – in affordable, reliable electricity for our region.

FACT: Higher energy taxes undercut Pennsylvania’s ability to compete for job-creating investment.  

  • COMPETITION FOR INVESTMENT: Higher energy taxes further undercuts the Commonwealth’s competitiveness and ability to attract job-creating capital investment, putting Pennsylvania at a disadvantage to states with lower taxes as companies decide where to invest. Coupled with a worsening “regulatory logjam” as reported by the Associated Press, and new unnecessary regulatory changes, Pennsylvania is moving backward in the fierce global competition for job-creating capital.
  • DEEP PRICE DISCOUNT: Pennsylvania has the deepest discount or pricing differential than any other region of the country. In 2016, producers were paid 47% less in Pennsylvania than what they received in the Southwest. Average Pennsylvania price in October was $1.05 compared to $2.97 at the national benchmark. Given the state of our market conditions in Pennsylvania that make us inherently less competitive with other plays, not only do calls for additional energy taxes give pause to investment decisions, but they also completely ignore the existing barriers to development in the Commonwealth.
  • OH / WV PRODUCTION GROWTH: Through the first half of this year, according to the IFO, natural gas production growth in Ohio and West Virginia topped 10%, outpacing Pennsylvania’s mere 2%. As the Pittsburgh Business Times reports, “Ohio has narrowed the gap close to near parity with Pennsylvania when it comes to the number of oil and natural gas rigs in each state.” 
  • HAYNESVILLE SHALE “ROARING BACK”: As SNL Financial reports, capital, like water, follows the path of least resistance: “Through a combination of lower costs from drilling technology advances, an influx of private equity investment and shifts in energy markets, the Haynesville is on the upswing again.” 

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