HARRISBURG — As Gov. Tom Wolf lobbies to get the Legislature to increase the tax paid by gas drillers, critics warn his plan could jeopardize impact fee dollars that have been used in large and small ways across the state.
State agencies got about 10 percent of the $174 million in drilling impact fees paid last year. Local counties and communities where drilling occurs got 60 percent of the remaining $156.6 million. The rest went into the Marcellus Legacy Fund, a pot of money that helps pay for a wide variety of projects, including water and sewer, stream restoration and recreation.
“The fund has done exactly what we hoped it would,” said David Spigelmyer, president of the Marcellus Shale Coalition, the trade group representing the gas industry in Pennsylvania.
While most people recognize that the largest share of impact fee dollars stays in the areas where drilling is taking place, few realize how much money trickles across the state, he said.
For instance, over the years that pot provided close to $600,000 in funding for the Anthracite Outdoor Adventure Area in Northumberland County. It provided $175,000 for the Sharon Riverfront Park in Mercer County. Another $2.75 million went toward the cost of sewer work in Hornerstown, Cambria County.
The same fund has poured money into projects in the most urban parts of the state, including more than $15 million in Philadelphia and Allegheny County.
“Folks don’t know where it’s coming from,” Spigelmyer.
Resistance to plan
The governor’s original severance tax plan from 2015 would have capped the amount collected in impact fees. Under that approach, the state would have simply taken a portion of the severance tax to cover the cost of what had previously been collected in impact fees.
That idea worries industry officials who argue it might not provide the means to compensate communities if new drilling activity develops in their backyards.
“They would draw a stark line” on how much is devoted toward impact fee payments, to allow the rest of the new tax to fill holes in the state budget,” Spigelmyer said.
Stung by resistance to that plan, the governor has tweaked his severance tax plan to better ensure that the impact fee will continue to serve its purpose, said Doug Hill, executive director of the County Commissioners Association of Pennsylvania.
Wolf’s plan to create a 6.5 percent severance tax would keep the impact fee collections in place and allow drillers to deduct any impact fee payments from their severance tax bills, said J.J. Abbott, a spokesman for the governor.
Even deducting the impact fee payments, the state still stands to collect another $293 million in severance tax under the plan, he said.
Hill said his group considers Wolf’s current severance tax approach an improvement over the governor’s earlier proposals.
But if there is a severance tax approved by the Legislature, it’s far from clear that it would be the governor’s plan without changes, said state Rep. Greg Vitali, D-Delaware County, who has been one of the leading proponents of a severance tax.
There’s some question about the wisdom of the way the money is divvied up now, he said. The state doesn’t require communities to demonstrate any correlation between the impact of drilling and the way the impact fee payments are used, he said.
Still, Vitali said that any severance tax would need to include protections for the impact fee payments. There are too many lawmakers who would refuse to support a plan that would stop money now flowing to their districts, he said.
“A lot has to do with politics,” he said. “So most of the plans say ‘we are going to hold you harmless’” and ensure that communities now getting money don’t lose it.
It’s still going to be a tough lift to get the Legislature to embrace the notion, even as the state grapples with a deficit that tops $2 billion.
Reasonable to take a look
State Rep. Tedd Nesbit, R-Mercer County, said it’s reasonable for the state to take another look at the way it’s taxing the industry five years after the impact fees were created.
“We still need to be careful we don’t tax the job creators out of Pennsylvania,” he said.
Vitali said polls show that most Pennsylvanians support the idea of taxing the gas industry.
The public support may be inflated by the fact that many people don’t regard the impact fee as a tax, said state Rep. Lynda Schlegel Culver, R-Northumberland County.
The drillers and their allies in the state Legislature don’t think there’s a distinction between an impact fee and a tax.
She said that some lawmakers want to change the name of the impact fee to quell the perception that the industry isn’t taxed.
Even so, because of the state’s budget problems, combined with strong resistance to sales and income tax increases, the tax on drilling is going to be on the radar, she said.
John Finnerty covers the Pennsylvania Statehouse for Community Newspaper Holding Inc., the company which owns The Daily Item. Email him at email@example.com. Follow him on Twitter at cnhipa.