Pa’s Oil And Gas Industry Focuses On Potential Of Natural Gas Development In Opposition To Severance Tax

March 16, 2009
HARRISBURG, Pa (March 16) – Representatives of Pennsylvania’s oil and gas industry expressed concern today about continuing calls for the imposition of a severance tax on natural gas extraction in Pennsylvania at this time, citing a number of factors that could combine to slow the development of the industry and the economic benefits it will provide across the Commonwealth.
Pennsylvania Oil and Gas Association President Stephen Rhoads urged caution in approaching any tax proposal that can influence investment decisions being made by exploration and production companies.
“In this economic environment, companies actively involved in the development of Marcellus Shale must carefully determine where their manpower, equipment and resources should be committed and operated for an extended period of time,” said Rhoads. “Pennsylvania is competing against states around the country for that investment, and a severance tax, imposed just as the industry is getting a foothold on this important shale development, will have a considerable negative impact on the state’s ability to compete with those states.”
“We must also be careful because a tax like this also could undermine the economic viability of the Commonwealth’s indigenous shallow gas industry,” Rhoads said. “All of Pennsylvania’s current production comes from economically marginal shallow wells. Producers operating these wells make a significant economic contribution to many rural Pennsylvania communities.”
Rhoads also emphasized the need to consider the efforts by the natural gas companies to work with communities and individual property owners regarding issues rather than attempt to mandate tax revenue be allocated to local governing bodies.
“Our industry works cooperatively with property owners and the communities in which we do business to provide compensation for equipment such as pipelines and support structure, doing so on a site-specific basis to understand and resolve concerns.,” he said. “Further, we have a strong track record and continuing commitment to repair and restore local roads that might be affected during the drilling process, building a relationship with local officials that typically results in improved road conditions and related facilities.
“More taxes are not the answer,” added Rhoads. “The number of onshore drill rigs in operation has decreased in the last year, and the price of gas, the availability of credit and the business environment faced by the drilling companies all will be factors in determining which states see drilling activity and the economic benefits it provides.”
The committee also presented information regarding comparisons being made by some organizations between Pennsylvania and West Virginia, which imposes a severance tax on natural gas extraction:
In the decade leading up to the year 2000, the number of wells drilled each year in Pennsylvania and West Virginia was nearly identical. Since that time, as natural gas prices trended higher, the number of wells drilled in West Virginia each year has been approximately half of the amount drilled in Pennsylvania.
The number of wells influences the number of workers employed. According to recent published reports, West Virginia supports 10,000 fewer jobs in the oil and gas industry than Pennsylvania, an employment rate that will continue to be influenced heavily by Marcellus Shale drilling activity.
Pennsylvania's shallow wells historically have produced smaller volumes of crude oil and natural gas, making them only marginally profitable. An additional tax on those shallow conventional wells, which are being drilled in many counties across the state, will have an extremely negative impact on that portion of the oil and gas industry.
The Pennsylvania Oil & Gas Association and the Independent Oil & Gas Association of PA:
The Pennsylvania Oil & Gas Association (POGAM) and the Independent Oil & Gas Association (IOGA) are the two principal non-profit trade associations of the Commonwealth's independent oil and gas producers. POGAM and IOGA promote the general welfare of Pennsylvania's crude oil and natural gas exploration and production industry. These two associations are committed to the economical and environmentally responsible development, production and use of the Commonwealth's crude oil and natural gas resources.
Pennsylvania Marcellus Shale Committee
Formed in 2008, the Marcellus Shale committee represents the oil and gas industry in Pennsylvania on matters pertaining to the acquisition, exploration, drilling, and development of the Marcellus Shale natural gas resource and provides a unified voice before all state, county, and local government or regulatory bodies. The committee, sponsored jointly by the Pennsylvania Oil and Gas Association and the Independent Oil and Gas Association of Pennsylvania, includes independent producers with historical expertise in the Pennsylvania oil and gas fields and national companies dedicated to bringing their industry experience and resources to achieve common goals.

Marcellus Shale Committee Issues Statement on Severance Tax

February 4, 2009
The Marcellus Shale Committee (MSC) today released the following statement in response to a proposal to impose an oil and gas severance tax, as outlined in the Commonwealth of Pennsylvania’s fiscal year 2009-2010 budget address. A more thorough evaluation of this proposal will be conducted in the coming days, along with a more detailed response from the Committee.
“Pennsylvania is blessed with rich natural resources, including a potentially large natural gas field in the Marcellus Shale. Although the MSC strongly opposes a broad-based severance tax, especially while the development of the Marcellus Shale is in its infancy, the industry remains willing to work through the Commonwealth’s current financial challenges with the Governor and the legislature.

“The committee believes some of these challenges would be better addressed through an expansion of developing natural gas resources on state-owned land that would yield substantial immediate bonus payments and long-term royalty income for decades. This option would not only help create new jobs, it would also provide an immediate economic benefit that does not hinder growth and development, especially in these difficult macroeconomic times.

“While West Virginia may have a similar severance tax, West Virginia does not have the same regulatory challenges that exist in Pennsylvania. We strongly believe the Governor and the legislature want Pennsylvania to be a leader in the development of this important energy source. As such, it is essential to point to development models in Texas and Arkansas, two of the largest shale gas producing states. Both states have far more favorable tax approaches, and Pennsylvania is competing against these states for investment in equipment, technology and other aspects of natural gas development. The Marcellus Shale could provide an economic boost for the Commonwealth for many generations, but not if it is prohibited from developing through a hastily imposed severance tax.”

Marcellus Shale Committee Begins Advertising Campaign

The Marcellus Shale Committee, an organization dedicated to the responsible development of Pennsylvania’s natural gas resources contained in the Marcellus Shale formation, has launched a comprehensive advertising campaign. The campaign, which will focus on print, online banner, radio, and billboard advertising, will continue through August 2009.
“The natural gas industry is an integral part of the Commonwealth and will continue to provide economic opportunity and energy independence for many decades,” said Rich Weber, Co-Chair of the MSC and President of Atlas Energy Resources.
“By initiating a targeted advertising venture across the state, we intend to generate an awareness of the MSC and the overall importance of Pennsylvania’s natural gas industry,” said Ray Walker, MSC co-chair and Vice President of Appalachia Shale for Range Resources.
The advertising campaign will target 21 Pennsylvania counties where the presence of natural gas drilling is strongest. Advertising will be focused in Allegheny, Armstrong, Bradford, Butler, Centre, Clearfield, Clinton, Elk, Fayette, Dauphin, Greene, Indiana, Lackawanna, Luzerne, Lycoming, Sullivan, Somerset, Susquehanna, Tioga and Washington and Westmoreland Counties.
All advertisements will spotlight the Marcellus Shale Committee’s three main messages: “Energy Independence,” “Economic Prosperity,” and “Environmental Stewardship.” The advertisements will also focus on directing the public to the Committee’s project website,