REGIONAL NEWS:
Think tank warns of gas industry tax breaks HARRISBURG - A Harrisburg think tank urges state lawmakers not to go along with calls by the natural gas industry to tax gas production at a lower rate during a well's early years of production.The Pennsylvania Budget and Policy Center also warns lawmakers away from industry-backed proposals to exempt low-producing wells from taxation and to deduct processing and transportation costs from the tax base.Adopting both proposals means that just one-third of natural gas produced by a well would be subject to a state severance tax, the budget center said. These recommendations are contained in the latest in a series of reports by the center explaining how a severance tax should be structured.House and Senate leaders have declared their intent to pass a severance tax by Oct. 1, to go into effect Jan. 1. Both chambers return mid-month.The center isn't taking a position on whether a severance tax should be levied as a percentage of the sales price or at a fixed rate per thousand cubic feet of natural gas that would be updated each year, said research director Michael Wood. If lawmakers decide on a fixed rate, it would make sense to follow neighboring West Virginia's example, the report suggested. West Virginia has a severance tax at 5 percent of the sales price plus a fixed rate that has ranged from 26 to 35 cents per thousand cubic feet this year.Pennsylvania could set a fixed rate between 30 and 35 cents per thousand cubic feet and stay competitive with other gas-producing states, the report said. Pennsylvania doesn't subject natural gas and oil deposits to property taxes.The Marcellus Shale Coalition, an industry trade group, is lobbying for a three-tier well tax. "High cost" wells that go to 5,000 feet or below the surface would be taxed at 1.5 percent of market value of gas produced for the first five years, with a 5 percent rate kicking in after that."Marginal" wells, which are not capable of producing, in a month, more than 150,000 cubic feet of gas per day, would be taxed at 1 percent of market value. Wells not capable of producing more than 90,000 cubic feet of gas per day would be exempt.Contact the writer: rswift@timesshamrock.com

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