Gas severance tax could stunt job growth in Pennsylvania

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  According to study released May 7 by the Associated Petroleum Industries of Pennsylvania (API-PA), proposed natural gas severance tax would have negative economic consequences for the state. This is a highly productive industry that supports thousands of jobs and generates  $34.7 billion annually to the state economy. It is because of Marcellus natural gas trend, a large and prolific area of shale gas extraction from the  Marcellus Formation which stretches across Pennsylvania. It is the largest source of natural gas in the US.

Marcellus_Shale_USGSMarcellus Shale

  „Higher energy taxes could put a damper on energy activity, and the commonwealth could be worse off with a new severance tax” said Stephanie Wissman, API-PA executive director. He also warned that if a new tax will be created, the commonwealth could lose 6,000 jobs just in 2016. The cuts won’t be just in the oil and gas sector but also across a range of industries that are part of the gas industry supply chain and from related service industries.

  In Pennsylvania exists local impact tax, which is collected from every shale drillsite in this state. Under Pennsylvania law, the passage of a new severance tax would repeal the existing gas impact fee. But the study estimated that new tax may cause an investment and production losses in amount of over $20 billion in value added or gross state product to the Pennsylvania economy during 2016-25.

  By 2025, supported employment in the state could drop by nearly 18,000 relative to projected levels without the tax, the study said, adding high-paying construction and oil and gas sectors would be hardest hit. “State lawmakers should reject the severance tax so that the benefits of Pennsylvania’s energy development continue to flow” said Wissman.

  The conclusion is that there is going to be jobs reduction regardless of the new tax. It could just make the cuts more noticeable. It also shows that the current situation in o&g industry not only depends on extractive or technological factors but also on the goodwill of the government. One move, such as creating this new severance tax, could stop the industrial flow by lowering the production profitability, causing jobs reduction and making the situation worse overall.

sources: americanpetroleuminstitute.com

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