Inaction on drill tax has a bad odor to it

Brian O'Neill's book, "The Paris of Appalachia: Pittsburgh in the Twenty-first Century," is available in the PG store

"Fat, drunk and stupid is no way to go through life, son.''

At least once a year, I trot out that advice from Dean Wormer to the frat boy Flounder in that classic film, "Animal House.''

Why? Because it seems so apt when I ponder America's Largest Full-Time State Legislature inaction. (Remember, boys and girls, "in action'' is always best compressed to one word when we discuss Harrisburg.)

My description is not entirely fair. Our statehouse is not drunk. Drunks, most of them anyway, eventually sober up and come to their senses.

But the fat, 253-headed monster that is our Legislature is generally too big to get out of its own way, and almost invariably does something stupid. Or it does nothing, which turns out to be just as stupid.

Its latest gaffe is passing on collecting tens of millions of dollars in revenue from the oil and gas industry, which is making huge money in our state (and passing a good bit of it around Harrisburg).

Nearly all of the nation's natural gas comes out of the ground in states that have severance taxes, but we won't have any.

Democrats are blaming Republicans for the impasse. Republicans are blaming Democrats. Given that any state lawmaker always has 252 peers available to blame for chronic inertia, citizens are free to slap the devil's horns on almost anyone.

But it's clear the Democrats were ready to follow Texas, Oklahoma, Alaska and all the other big gas-producing states and impose a tax that was something more than a token. Republicans were willing to support only a small tax like Arkansas', which doesn't tax much at all until a well's most productive years are over.

Democratic Gov. Ed Rendell threw up his hands late last week and said the gas tax "clearly is dead for the year.'' Senate Republicans said they want the governor to reconsider, but they haven't moved off their initial lowball offer of a 1.5 percent tax for a well's first five years and 5 percent thereafter.

Bill Holland is associate editor of Gas Daily, which covers the natural gas market in North America. He said, "Industry analysts have never been very concerned'' about paying a tax in Pennsylvania.

Even the House bill passed largely by Democrats last month wasn't that big a deal, Mr. Holland said.

"They expect a tax eventually -- like there is everywhere else drilling occurs,'' he said.

It's not as if profit margins are low. Mr. Holland pointed to Chesapeake Energy's recent statement that its break-even selling price for drilling Marcellus Shale gas is $2.45 per thousand cubic feet, and Friday's closing price for gas futures was $3.35.

Now drillers don't have to worry about even a pin scratch on that pretty price spread. They certainly won't have to second-guess their campaign contributions to top state Republicans.

Tom Corbett, Republican candidate for governor, has received about $373,000 from natural gas companies, according to Common Cause/Pennsylvania, and Mr. Corbett has said he is opposed to any new tax.

Senate President Pro Tem Joe Scarnati, R-Jefferson County, runs second in these contributions with $117,575. Hedging their bets, the companies also gave $84,100 to Mr. Rendell and $74,300 to Dan Onorato, Democratic candidate for governor.

So maybe we shouldn't wonder that Pennsylvania is alone among the big gas-drilling states without a severance tax. Maybe we should wonder how discussions got this far.

"People don't write checks of five and six figures before the decimal point because they're investing in good government,'' said state Rep. David Levdansky, D-Forward, himself a recipient of $8,850 in industry contributions. "They intend to effect a legislative outcome or change."

Mr. Levdansky was behind the House bill that would levy 39 cents per thousand cubic feet of gas. That had no hope of passing the Senate, but he said the Republican counter-offer was worse than no bill at all.

The GOP Senate leaders "played out the clock,'' said environmental advocate Jan Jarrett, president of Penn Future.

She said Republican leaders spurned the governor's compromise proposal that was lower than his initial suggestion of mimicking West Virginia's 5 percent levy, plus 4.7 cents per thousand cubic feet.

"I don't believe they wanted to pass the severance tax,'' she said. "I've been around Harrisburg long enough to know that if people want to get things done, there are ways to do it.''

The new Pennsylvania motto: Drill us, baby. We'll cover any environmental damage ourselves and balance the budget with our residents' money.

First published on October 24, 2010 at 12:00 am