Tax-free damage: Marcellus states should make polluters pay
January 5, 2011
The turn of a year signals new plans and possibilities. But as 2011 kicks off, elected officials are wondering how in the face of steep federal and state deficits they'll ever have the funds to realize policy goals.
In the Marcellus Shale region, it s been tempting to plug budget holes with the quick bucks that come from issuing permits and leasing state land for gas drilling. But this stop-gap measure can also mean an increase in drilling, and with it the need for even more revenue to pay the steep costs of gas development (like road damage, toxic clean up, and health problems). Tackling those impacts requires steps many politicians are loath to take, like long-term planning, bold regulatory change and taxing industry.
Pennsylvania and New York are the only oil- and gas-producing states without a severance tax to make companies pay for the resources they sever from the land forever. Resource extraction taxes can offset the financial burden placed on public coffers and, when used appropriately, mitigate damage to drilled communities and the environment. Severance taxes vary widely in basis (value or volume), rate, and exemptions, but don't appear to deter industry from seeking the resources from which they so greatly profit.
According to the Pennsylvania Budget and Policy Center, the state has lost more than $120 million (and counting) in potential revenue since October 2009 because of the lack of a severance tax. The public burden for road damage alone from gas drilling is an estimated $35 million, according to the PA Department of Transportation. Incoming Governor Tom Corbett has been against taxing industry, but post-election now says he d consider one.
New York has over 10,000 active oil and gas wells, and many associated health and environmental impacts have gone unremediated for decades. Vertical drilling using hydraulic fracturing has also begun in the Marcellus. With this practice linked nationwide to water contamination and other problems and the groundwork now laid to convert to horizontal wells when the timeout on permits for that type of drilling ends it s none too soon for New York to get its gas tax house in order.
A lack of funds is a key reason why industry oversight is lax, with legislators in both Pennsylvania and New York cutting the budgets of agencies responsible for monitoring and enforcement, even as drilling expands. The smart policy is to regulate drilling to prevent damage and to consume less energy and get it from clean sources. But whenever and wherever gas drilling does occur, polluters should pay the price not communities and the environment.