Higher Energy Taxes are a “Boneheaded Move” Risking Jobs, Investment

Our abundant natural gas resources give Pa. manufacturers an energy advantage, as low-cost, reliable natural gas has created new generational business opportunities. Harnessing our energy resources for end-use opportunities in power generation and manufacturing can “be the engine of new growth” for the Commonwealth, Chevron Appalachia’s Stacey Olson and Peoples Natural Gas’ Morgan O’Brien wrote in Sunday’s Post-Gazette:

“We believe it’s time to focus on economic growth as a central driver of the solutions Pennsylvanians need and want. We are literally standing on an unprecedented, once-in-a-century opportunity to generate the kind of economic growth that can move us from talking about our problems to acting on solutions.”

They’re absolutely right. Pennsylvania natural gas  presents an opportunity for the Commonwealth to regain its crown as one of the nation’s top manufacturing states. With local, low-cost natural gas – which serves as a critical feedstock in many manufacturing processes – we have a growing energy advantage that can, as Olson and O’Brien put it, “make a much bigger pie” for our economy.

More from their Post-Gazette column:

Pennsylvania’s abundant, clean and low-cost energy resource can be the engine of new growth sectors throughout the state. … the Forge the Future assessment shows that Pennsylvania, within the next decade, can potentially achieve the following benefits: a $60 billion increase in state GDP above the current trajectory; an increase of more than 100,000 family-sustaining jobs; conversion of half a million homes from fuel oil to low-cost gas for heating; three to five new ethane cracker plants in addition to the recently announced Shell facility; and roughly $3 billion annually in new state tax revenues.

But Pennsylvania is at a crossroads where poor policy choices – such as enacting higher energy taxes, suffocating regulations, extremist-driven bans on hydraulic fracturing, and allowing chronic permitting delays – could jeopardize our opportunity for long-term, stable economic prosperity. As MSC’s Dave Spigelmyer wrote in the Post-Gazette last week, Pennsylvania needs competitive, pro-growth policies to help make these end-use opportunities a reality.

“We’re in a tight fight for the limited capital investment that supports natural gas development, infrastructure and job growth. Make no mistake: Investment will flow to the regions with the best rock, available infrastructure and, importantly, a more competitive tax and regulatory structure.”

While some politicians continue to press for dangerous and deeply misguided energy tax increases, such actions would amount to a “boneheaded move,”, that would jeopardize jobs and growth, Pa. Manufacturers’ Association’s David Taylor said. Thankfully, some legislators understand the need for a competitive market that attracts jobs and investment to the Commonwealth, as the House passed a revenue package yesterday that eliminates the job-crushing energy tax increases from the Senate’s plan.

We understand, as Spigelmyer wrote in his letter to the Post-Gazette, that there are “no easy answers to the commonwealth’s chronic budget troubles.” But solutions that “strengthen Pennsylvania’s competitiveness” will “jump-start our economy and generate significant, long-term revenues.”

Here’s what they’re saying:

  • Another Energy Tax Would Only Hurt Pa.: [Even higher energy taxes] represent more than the “flea bite” described by the author — they jeopardize local jobs, family budgets and employment opportunities for future generations. Pa. natural gas producers pay their “fair share.” The state’s impact fee — which equated to a 9.16 percent tax on production in 2016 — has generated more than $1.2 billion in new revenue for the commonwealth. … Despite these facts, some continue to press for more and even higher energy taxes. Combine these tax hikes with Pa.’s second-highest-in-the-nation corporate net income tax and the chronic regulatory logjams that operators face, and we are at huge competitive disadvantage with states vying for the same capital. We’re in a tight fight for the limited capital investment that supports natural gas development, infrastructure and job growth. Make no mistake: Investment will flow to the regions with the best rock, available infrastructure and, importantly, a more competitive tax and regulatory structure. In fact, we’re already seeing an erosion of capital investment amid the commonwealth’s burdensome climate and painful market challenges. Pa.’s rig count dropped by nearly 10 percent just last week, falling to 31. Four years ago, it stood at 111. There’s no easy answer to the commonwealth’s chronic budget troubles. But here’s one solution that won’t sacrifice jobs or economic growth: Strengthen Pa.’s competitiveness to jump-start our economy and generate significant, long-term revenues. (Post-Gazette letter, 9/8/17)
  • Manufacturers: Passage of a Severance Tax Would be a “Boneheaded Move”: State Rep. Jim Christiana, several other lawmakers and groups representing Pa. business owners, workers and its manufacturing industry called on Gov. Tom Wolf and House and Senate lawmakers to abandon calls for a severance tax on shale gas production in the commonwealth. … Christiana and other lawmakers and industry representatives said the state has been attracting a “robust” petrochemical industry to the commonwealth since 2012. He added that with Pa.’s abundance of ethane being produced along with natural gas – ethane is used to form ethylene, a building block for scores of petrochemical and plastic products – the state has the opportunity to attract manufacturers that will create more jobs. … Christiana said if a severance tax is passed, “the government will be arbitrarily raising the price of what is the critical piece” in attracting industry to the state. … He noted since the year began, the active rig count in Pa. is down 75 percent, while Ohio’s has risen 100 percent. He added that while Dow Chemical plans to invest $8 billion in the United States, none of the spending includes Pa.. Exxon has said it will spend an additional $20 billion in investment in petrochemicals in the United States, but plans no spending in the commonwealth. Gene Barr, president and chief executive officer of the Pa. Chamber of Business and Industry, noted that capital investment “is fluid; capital will move because companies need to make that rate of return. If they cannot get that rate of return in the commonwealth, they will go elsewhere.” Passage of a severance tax would be “a boneheaded move,” said David Taylor, president of the Pa. Manufacturers Association, given that Pa.’s low ethane cost has the potential of attracting more petrochemical manufacturers, something that would diminish with the added tax. (Observer-Reporter, 9/11/17)
  • Christiana Says Severance Tax Would be ‘Horrendous Public Policy,’ Should be Pulled from Revenue Bill: State Rep. Jim Christiana on Monday called for the proposed severance tax on natural gas drilling to be pulled from a budget revenue bill, saying it would be “horrendous public policy” that could threaten the petrochemical industry’s future in Pa.. “There are plenty of other ways to solve this budget impasse,” said Christiana, R-15, Brighton Township, during a press conference in Harrisburg with fellow lawmakers and industry officials. “There are plenty of other options on the table.” … A severance tax “will drive away huge opportunities,” he said. … The petrochemical industry can lead to a “rebirth” in manufacturing not just in western Pa. but the entire state if burdens such as the severance tax and corporate income taxes do not get in the way, Christiana said. While there is excitement over Shell Chemicals’ $6 billion ethane cracker plant coming to Potter Township, Christiana said that could be just the beginning if a severance tax does not “wreck” those prospects. “We risk every petrochemical opportunity in this state,” he said. “Our victory lap needs to end.” … Joining Christiana on Monday was House Speaker Mike Turzai and state Rep. Aaron Bernstine, R-10, New Beaver. “It’s a punitive tax that’s being proposed,” Bernstine said. Turzai said people across southwest Pa. rely on the natural gas industry for jobs and “this tax in any form is going to put their jobs at risk.” Gene Barr, the CEO of the Pa. Chamber of Business and Industry, said his 9,000 members have “serious concerns” about a severance tax. Barr warned that the gas industry will flee Pa. if the tax and regulatory burden is too great. “These companies will leave,” he said. “There are other places to get natural gas.” … “Those people need to wake up,” Christiana said. “Working Pennsylvanians” will ultimately pay the price of a severance tax because companies will simply pass along costs to consumers or cutback on jobs, said Matt Brouillette, president of Commonwealth Partners Chamber of Entrepreneurs. (Beaver Co. Times, 9/11/17)

Join the conversation on social media with #SayNoToSeverance and learn more by visiting the MSC’s blog.

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