BRINGING A SEVERANCE TAX ON NATURAL GAS TO PENNSYLVANIA: WHO, WHAT, WHY, WHEN, AND HOW?

Note Written By: Samuel M. Smith

Governor Tom Wolf and lawmakers from both parties have proposed that a severance tax on natural gas be enacted in the Commonwealth. No one can seem to agree on what form the tax should take. This begs the question of “what is the best severance tax plan for Pennsylvania?” This Note will attempt to answer that question. First, this Note begins with a basic description of the history of natural gas drilling in the Marcellus Shale, the basic mechanisms of severance taxes, and outlines the current situation regarding natural gas taxation in Pennsylvania. Next, we will introduce and analyze Governor Tom Wolf’s proposed severance tax, and also examine the severance tax schemes of four other natural gas producing states (Kentucky, Ohio, Wyoming, and North Carolina.) Finally, this Note examines the pros and cons of each tax scheme against one another in order to determine which tax scheme would be best for Pennsylvania, while taking into account several factors unique to Pennsylvania.

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