American Oil and Gas Reporter - February 2015 - 110

and the $1 billion that was going to spring
from that. That is nowhere near the
amount of money the administration will
get out of this industry, even at the percentages they claim."
The commodity price downturn has
changed both the arguments supporting
severance taxes as well as the revenue
estimates, he reasons. Under the new
market conditions, D'Amico cites oil and
gas analysts' estimates that say a 5.0 percent severance tax will raise no more
than $350 million, with most expecting
the actual numbers to be far lower.
PIOGA remains optimistic sufficient
numbers of House and Senate supporters
remain solidly opposed to any severance
tax, Slagel says. PIOGA is working with
the Marcellus Shale Coalition and the
American Petroleum Institute-Pennsylvania to back those efforts. Slagel says
an industry-supported analysis that documents the fiscal pitfalls of imposing
such taxes will help the coalition.
"The study will provide not only a
narrative on reasons on why Pennsylvania
should not impose a severance tax, but it
also will include some very relevant numbers documenting that 2015 projections
show even unconventional gas operations
are going to be in the negative," he reports.

"I hope those numbers in the white
paper will convince the administration to
finally recognize that this is not the time
to do what it wants to do. If Governor
Wolf wants $200 million, $300 million,
or even more, it is simply not there in the
shale gas severance tax. The administration
will have to find some other way to make
up that shortfall."
Slagel reports the oil and gas industry
has a large degree of legislative support,
a factor that becomes more important as
Republicans have increased their majorities
in both the Pennsylvania House and Senate. After the 2014 elections, Republicans
improved their representation in the lower
chamber from 111 to 119 out of 203
seats, while the Senate added three Republicans, bringing the party's domination
to 30 seats out of 50.
The industry representatives also tend
to think the Senate leadership has changed
for the better, Slagel says, with Senator
Jake Corman, R-Bellefonte, taking over
as majority leader. Corman is a strong
supporter of the oil and gas industry,
Slagel says, and is likely to keep more
liberal Senators in line regarding the severance tax.
That may prove critical as the new
governor tours the state touting his severance tax plans, Slagel cautions.

110 THE AMERICAN OIL & GAS REPORTER

"Wolf was in Pittsburgh, pledging to
tax the natural gas industry because that
is where he will get the money he needs
to fund some of the cuts that occurred
under Governor Corbett," Slagel says.
"I don't know where Wolf thinks the
money is. He started by saying $500
million was out there to be collected
(from) a severance tax; he then upped
that to $1 billion. We all were scratching
our heads, asking where he was coming
up with that figure. Now, from what I
am hearing based on $3 natural gas
prices, if he can get $200 million out of
the industry, he will be lucky. The money
he thinks is there is not."
PIOGA General Counsel Kevin Moody
points out that the January 2015 Commonwealth Court decision upholding the
governor and legislature's authority to
use money from leasing state lands for
oil and natural gas development for general
fund matters gives the Wolf administration
a better way of raising money to address
budget shortfalls.
"The rationale for the severance tax is
that Pennsylvanians are not getting adequately compensated for the development
of 'our' natural gas resources, but the
only resources that belong to the people
are the 'public' resources," he says.
"So that rationale, and now the court
American Oil and Gas Reporter - February 2015

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