PA may want to tax gas extraction companies

By TOM KANE

HARRISBURG, PA - Gas drilling companies that are reaping profits in Pennsylvania do not pay taxes and some people in municipal organizations want to change that.

“Actually, we want to restore the tax,” said Doug Hill, executive director of the County Commissioners Association of Pennsylvania (CCAP). “Oil and gas were taxed as real property for over a hundred years, but litigation was brought before the Pennsylvania Supreme Court by gas companies in the 1990s. The court ruled in 2002 that oil and gas were not taxable.”

The court said that the state statute did not give clear taxing authority, he said.

“We have been in communication with some state legislators to see if we could reverse the court decision,” Hill said. “When the legislature comes back in session in January, we will bring the issue before some other legislators.”

There are two ways to compensate the locality. One way is the real property tax and the other way is a well-head tax linked to production.

“Governor Rendell has been asked if the Commonwealth will impose a well-head tax but he said that such an action would have to wait until his new budget is developed,” Hill said. “Since the state has a billion-dollar fiscal hole to fill, such a tax might make sense.”

Senator Jake Corman, chairman of the Republican Policy Committee, said there is a general understanding that the municipalities and schools where drilling is taking place need to be compensated for the increased use of resources.

“We are going to hold a hearing to explore all issues around the Marcellus Shale play on how the municipalities and the schools need to be compensated,” Corman said. “There is no effort at this point to come up with a new tax. We want to understand what’s going on in the townships and how best to compensate them.”

Raising a tax may be something we might do in the future, he said.

The Republican Policy Committee will hold a hearing on this issue on November 18 at Misericordia University in Dallas, PA.