(Reuters) – A top Pennsylvania Republican rejected a Democratic-sponsored plan for taxing natural gas production on Wednesday, vowing to stop a bill that he said would drive energy companies out of the state.
The opposition will force Governor Ed Rendell, a Democrat, to seek a compromise between Democratic and Republic plans.
Sen. Joseph Scarnati said a bill proposing to tax gas drillers 39 cents per 1,000 cubic feet of gas produced was “totally unacceptable” and that it would not even go to the Senate floor for a vote.
“We are not going to entertain a tax rate here in the Senate that is punitive to this industry,” Scarnati told reporters the day after the bill was approved by the Democratic-controlled House. “It’s absolutely ridiculous.”
The Democratic plan would raise revenue of $307 million in its first full year and impose a much heavier tax burden on the booming industry in the Marcellus Shale. The Republican proposal would tax at 1.5 percent of the market price for the first three or four years and is favored by the industry.
Lawmakers agreed during this year’s budget talks to settle details of the so-called severance tax by October 1, following pressure from Rendell, who has been calling for the tax for two years to boost state revenue and help pay for the environmental costs of gas drilling.
There’s now no chance of an agreement by the deadline although the Senate will continue to negotiate, Scarnati said. The Senate has three remaining days — October 12, 13 and 14 — in its current legislative session, when it could consider an alternative bill.
Rendell spokesman Gary Tuma said the governor will now seek a compromise between the two houses and would be satisfied if an agreement can be reached in early October.
“This is what we assumed the process was going to be about,” Tuma said.
Scarnati said such a tax would make it harder for Pennsylvania to attract gas industry investment at a time when the outlook for gas prices is flat given rising production across the United State.
Article by by Jon Hurdle; Editing by Daniel Trotta and Sofina Mirza-Reid; appearing courtesy Reuters.