Marcellus economic impact issues (Pittsburgh, Republic: compensation, taxes, live in)

[BrianTH]

So a Penn State study has found less positive economic impact from Marcellus in 2009 than the industry has been predicting:

Post Gazette article:

Penn State study finds fewer jobs, royalty revenues going elsewhere; 'still big numbers'

Nullspace commentary:

Nullspace: A tale of two economic impact reports

Actual study:

http://www.post-gazette.com/pg/pdf/2...finalaug28.pdf

One of the basic issues is "leakage": royalties and other economic benefits are not always going to entities located in Pennsylvania.

None of this means Marcellus is a bad deal overall, but it does suggest that industry projections of economic benefits for the state should be discounted as a general matter. It also suggests, once again, that a reasonable extraction tax would be a good idea, since that would serve to secure a higher percentage of the economic benefits for the state.

The people of Pennsylvania want an extraction tax, and in fact the legislature is willing to pass one, but Governor Corbett has threatened to veto it (and of course Corbett has gotten a lot of campaign contributions from the industry). I'm not sure Corbett is amenable to political pressure, but to the extent possible hopefully Pennsylvania citizens will be making sure the Governor and our state legislators know we favor a reasonable extraction tax.

[Caladium]

You probably know better than I do, since you live in the city and have a better idea of what your fellow citizens want--but FWIW I have a feeling people won't support any more taxes right now.

[UKyank]

Not against an extraction tax, but more localized taxation of the industry might be better.....I'd just hate to see the state levy a shale tax & then see a large % of the proceeds being carted off to SEPA.

[BrianTH]

Originally Posted by Caladium

You probably know better than I do, since you live in the city and have a better idea of what your fellow citizens want--but FWIW I have a feeling people won't support any more taxes right now.

Statewide support for a Marcellus extraction tax has been high and consistent in polls. Here is one example (finding 69% in favor):

63 percent of Pa. residents want gas drilling, poll finds | recordonline.com

Pennsylvania is the only major gas state without an extraction tax, and I think most people intuitively understand that a reasonable extraction tax will help secure more of the economic benefits for the state without significantly discouraging the growth of the industry (it is not like they can find the gas anywhere, and again all the other gas states already have extraction taxes).

[BrianTH]

Originally Posted by UKyank

Not against an extraction tax, but more localized taxation of the industry might be better.....I'd just hate to see the state levy a shale tax & then see a large % of the proceeds being carted off to SEPA.

How the proceeds are distributed is a legitimate issue, and that is a lot of what the legislature was working on before Corbett forced them to halt.

Personally, I think a balance would be good. Some of the proceeds should go to the localities and counties which are going to experience most of the costs of extraction. Some of the proceeds should go to fund enforcement of all the related regulations. And finally, I think some of the proceeds should be used to help diversify the state's economy.

Again, speaking personally, I don't have a problem with some of that last category going to SEPA. Basically, the Philly area and the Pittsburgh area are where most of the state's future economic development is going to occur, and we should be investing some of the proceeds in encouraging that development.

[Aqua Teen Carl]

This is just sad really. Our state is being harvested for gains by outside companies without being properly taxed to benefit the land it's leaching from. What's worse is that Corbett is being manipulated by these companies so they can do what they want. Sigh.

[Craziaskowboi]

The state legislature can override a veto, no?

[UKyank]

Originally Posted by Aqua Teen Carl

This is just sad really. Our state is being harvested for gains by outside companies without being properly taxed to benefit the land it's leaching from.

To be technical, the owners of the land the gas is being leached from are being compensated very well (& then taxed on that compensation), it's the roads & such outside of the land being drilled that is experiencing the negative repercussions without any benefit (though apparently some areas do receive compensation for road damages, but I dont know the details of how that works).

[BrianTH]

Originally Posted by Gnutella

The state legislature can override a veto, no?

Yes, but it takes a 2/3rds supermajority, and there are very likely enough Republicans loyal to Corbett to keep that from working. But I wouldn't mind if they wanted to try!

[BrianTH]

Originally Posted by UKyank

To be technical, the owners of the land the gas is being leached from are being compensated very well (& then taxed on that compensation)

As the study explains, it is more complicated than that. The gas rights may have been severed from the land rights, and in either case the rights-holder may be an out-of-state entity.

Meanwhile, Marcellus-related companies are making frequent use of PA's tax loopholes, most notably the Delaware loophole. I don't know if these loopholes are being used by out of state entities to avoid taxes on royalties specifically, but I wouldn't be surprised.