SUSTAINABLE FINANCE - A BLUEPRINT FOR SEVERANCE TAXES IN THE MARCELLUS SHALE

Article Written By: Ryan Pulver

Since the implementation of hydraulic fracturing, natural gas extractors have been able to reach deposits of natural gas that were previously thought cost prohibitive or impossible. The Marcellus Shale, which covers much of the Mid-Atlantic region, has become a plentiful source of natural gas because of the implementation of hydraulic fracturing. The environmental concerns of hydraulic fracturing have been well publicized in both the media and academia. However, little has been discussed about the pragmatic and ancillary aspects of natural gas extraction in the Marcellus Shale region, namely severance taxes.

Severance taxes are excise taxes on the extraction of natural resources. The severance taxes fulfill many roles including general gubernatorial funding, environmental protection funding, and as a general deterrence to the extraction of the natural resource. Despite the broad utility of severance taxes, many states in the Marcellus Shale region have not enacted severance taxes on natural gas. With issues facing states in the Marcellus Shale region such as budgetary difficulties and environmental protection, this Article postures that at least one of these states will enact a severance tax on natural gas in the near future. This Article attempts to provide a survey of severance tax policies from high natural gas producing states that already have natural severance taxes in place. In doing so, this Article emphasizes certain severance tax policies in states with active natural gas extraction as beneficial and practical for states in the Marcellus Shale region that have not yet enacted a severance tax on natural gas. In addition to endorsingcertain severance tax policies, this Article also discusses federal constraints on the states' enactment of severance taxes.

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