Friday, March 12, 2010

February 2010 Rendell's/Joe Preston's Budget Proposal to Expand Pennsylvania Sales Tax: Notice to Lobbyists to Open Their Wallets Again!

The February 2010 budget proposal by Govenor Ed Rendell/Joe Preston to expand Pennsylvania’s sales tax base has been popping up in some form or fashion over the past several years only to fail. The 2010 February budget proposal is just further notice to lobbyists to open their wallets again.

Please Note: Comparing recent expenditures with past lobbying efforts is difficult. Pennsylvania didn't enact its disclosure law until late 2006, long after most states. And, unless they provide gifts or lodging, those who try to influence state decision makers must report little detail other than the totals spent.

In early February 2009, when it became clear that the State budget was in crisis mode Natural-Gas Drillers opened their wallets. In short, Pennsylvania is the biggest natural gas producer that does not impose some type of tax on it.

That is, in February 2009, Govenor Rendell announced that he was pushing for a new tax on the odorless, colorless gas found deep below Pennsylvania soil. Rendell said the tax would bring in about $100 million in 2010, thanks to what he called the "Gold Rush" of new drilling for natural gas in the vast underground formation known as the Marcellus Shale. But by late August 2009, the Governor (to the surprise of many) said drilling executives had convinced him that imposing the tax would stunt the growth of the industry.

Thereafter, Rendell abandoned his push for the tax.

The Natural-Gas Drillers lobbyists would also win another victory during the prolonged budget battle, persuading lawmakers to open up thousands of additional acres of state forest land to drillers despite the concern of environmentalists. The Natural-Gas industry's argument: The State could bring in more revenue by leasing the land to drillers than by taxing the gas extracted.

The idea of leasing more land doesn't sit well with many House Democrats who are pushing legislation to put a five-year moratorium until the end of 2015 on leasing any additional state forest land. A bill sponsored by Rep. Greg Vitali, D-166, Haverton, would give the Department of Conservation and Natural Resources sole discretion after the moratorium ends to determine if more leasing can take place. Under D-166 the state must first evaluate the impact of drilling on the forests and water supplies before proceeding further.

The Natural-Gas Driller's lobbyists have successfully resisted the call for a severance tax in Pennsylvania - the tax the industry pays in every other state.

Under Gov. Ed Rendell’s/Joe Preston's proposed 2010-11 budget, Pennsylvania’s sales tax rate would drop from 6 percent to 4 percent, but would be applied to more categories (74 items that are currently exempt). The proposal faces an uphill battle, both in political and practical terms. To move forward with this proposal would represent a major shift in tax policy and Pennsylvania doesn’t move quickly on such major public policy initiatives.

The Question: Will Govenor Rendell/Joe Preston allow Natural-Gas Driller's lobbyists to succeed again (pressure Harrisburg to open up more of our precious forests simply because we have a budget deficit)?

Opponents say they aren’t taking the proposed shift in tax policy any less lightly despite the declaration of Joseph Scarnati, president of the Republican-controlled Pennsylvania Senate, that it was “dead on arrival.”

The Pennsylvania Institute of Certified Public Accountants reached out to its 20,000 members within days of hearing Rendell’s/Joe Preston's budget.

The Pennsylvania Bar Association President Clifford E. Haines shot off a letter to legislative leaders stating the industry’s opposition within a week.

National Federal of Independent Business members are also in the ears of state lawmakers.

Pennsylvania Newspaper Association has questioned the constitutionality of imposing a tax on one industry but not another. Under Rendell’s/Joe Preston's proposal, the state’s already struggling newspaper industry would face new taxes on not only advertising, but circulation — a double whammy.

Philadelphia, which received legislative approval in August to temporarily raise the city’s sales tax rate from 7 percent to 8 percent over the next five years to address budgetary shortfalls, would also be hurt.

In closing, Pennsylvania should enact a severance tax identical to West Virginia's: 5 percent on the value of sale, plus 4.7 cents per thousand cubic feet produced. The severance tax would produce $180 million in the fiscal year beginning July 1 and increase to nearly $530 million after five years, including 10 percent set aside for local governments (money to shore up a state treasury that faces a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid).

Todd Elliott Koger a 2010 candidate for the Pennsylvania House (District 24) is ready for a political tussle over whether and how Pennsylvania will tax methane from the potentially lucrative Marcellus Shale formation.

Please Note: Joe Preston received the following funds from Natural-Gas:

5/13/09 UGI PAC (UGI Corp) $500

5/11/09 FirstEnergy Political Action Committee $1,000

4/27/09 James Michael Love (LOB) $500

4/16/08 NFG PAPAC $500

4/10/08 James Michael Love Energy Association of PA $1,000

4/4/08 N.Source Inc. PAC-PA $750

4/2/08 UGI PAC (UGI CORP) $1,000

3/3/08 FirstEnergy Political Action Committee $1,000

6/22/07 Equitable Resources, Inc. $1,000

6/22/07 NFG PAPAC $1,000

5/16/07 FirstEnergy Political Action Committee $1,000

10/27/06 NFG PAPAC $175

10/16/06 FirstEnergy Political Action Committee $175

10/6/06 Equitable Resources $250

6/15/05 Equitable Resources $250

12/31/04 UGI PAC (UGI CORP) $250

6/29/04 FirstEnergy Committee $500

See also:

"Fight against state tax on gas extraction gets expensive"

Sunday, January 17, 2010

By Bill Toland, Pittsburgh Post-Gazette

In the last two years, energy companies with a stake in Pennsylvania’s Marcellus shale have spent hundreds of thousands of dollars lobbying and making campaign contributions to legislators, congressmen and the governor, partly in hopes of postponing a tax on the extraction of natural gas.

They also are laying the groundwork for future political battles. Range Resources Energy Independence PAC, for example, donated $5,000 each to Republican Attorney General Tom Corbett and to Democratic Allegheny County Executive Dan Onorato, both gubernatorial candidates, in the waning months of 2009.

Range Resources, with drilling rights to more than 1.4 million acres, is one of the biggest natural gas players in Pennsylvania, and is one of the most frequent campaign contributors as well. The company’s political arm gave to state Rep. Mike Turzai, R-Bradford Woods; Sen. John Rafferty, R-Montgomery; Sen. Joe Scarnati, R-Jefferson; Sen. Jake Corman, R-Centre; and Auditor General Jack Wagner, among others, in 2009. In turn, the biggest donors to the Range PAC are its top executives, such as Charles Blackburn (board of directors), John Pinkerton (CEO), Rodney Waller (chief of compliance) and Roger Manny (executive vice president).

Why all the cash? Energy companies view the Marcellus shale field, much of which is in Pennsylvania, as the next big natural gas bonanza, and have spent the past two years positioning themselves for the day when natural gas prices increase, making it a more profitable enterprise.

And the enterprise will remain more profitable so long as the Legislature and the governor are unable, or unwilling, to impose a tax on the extraction of gas.

The so-called “severance tax” was in the news again last week, as Gov. Ed Rendell announced the leasing of 32,000 acres of state forest land for drilling purposes, netting the state’s general fund $128 million. Five companies — Chesapeake Energy Corp. of Oklahoma City, Exco Resources of Dallas, Seneca Resources Corp. of Houston, Anadarko Petroleum Corp. of Houston, and Penn Virginia Corp. of Radnor, Pa. — submitted the highest bids.

After announcing the lease agreement, Mr. Rendell said he’d try again, in his 2010-11 budget proposal, to impose a severance tax, something in place in 28 other states. “It’s hard for the industry to cry poor mouth. Exxon just paid a high price to buy a [natural] gas company,” he said.

He said on Friday that an extraction tax could raise $100 million a year for the state.

Energy companies want to postpone or fight off the tax, citing a glut of natural gas in storage (which depresses prices), and the fact that companies already must pay an up-front lease price, as well as continued royalties, to landowners.

But the companies’ concerns go beyond the extraction tax.

“It’s all about education,” said Matt Pitzarella, spokesman for Range Resources. “While the industry has been in Pennsylvania for 150 years, modern natural gas development is very new. … At the end of the day, we have to do all that we can to ensure that [we] maximize this opportunity for the entire commonwealth, [and] take the steps to support the responsible growth of this industry.”

The PAC for Chesapeake Energy Corp. — which is the largest gas lessee in Pennsylvania — also appears frequently in the Department of State’s campaign finances records. It has contributed to Rep. Marc Gergely, D-White Oak; Rep. Dave Reed, R-Indiana; Mr. Scarnati, Mr. Corman, Mr. Onorato and Mr. Corbett, among others.

Other players:

• Anadarko, one of last week’s winning bidders, made several contributions in 2008, including a $500 contribution to Sen. John Wozniak, D-Johnstown.

• UGI PAC is the political arm of UGI Corp., an oil and gas firm out of Reading, Pa. The PAC has contributed to House Speaker Keith McCall, D-Carbon; Rep. Jeff Pyle, R-Armstrong; Rep. Joe Preston, D-East Liberty; Mr. Turzai and many more.

• Exco Resources (another of last week’s winning bidders) committed $500 to Sen. Don White, R-Indiana; $500 to Mr. Corman, and $500 to Mr. Scarnati, among several others.

• Cabot Oil & Gas is the third-largest drilling lease-holder in the state, behind Range and Chesapeake. Cabot and its executives have given to Mr. Scarnati.

• Spectra Energy, a Houston company with a presence in Washington County, has given $1,500 each to the Democratic state senate campaign committee and its Republican counterpart, and the same amount to the House Democrats’ and House Republicans’ campaigns.

• Cecil Township’s CNX Gas, a division of Consol Energy, leases about 40,000 acres. Its political action group — which is combined with Consol’s, called the Consol Energy Inc. & CNX Gas Corp. PAC — has given $2,500 to Mr. White, $1,000 to Mr. Corbett, $1,000 to Mr. Rendell, $1,000 to Sen. John Pippy, R-Moon, and thousands more since 2008.

Direct campaign contributions are separate from lobbying expenses, which the state also tracks. Range, for example, reported spending $70,600 in “direct communications” with lawmakers in the third quarter of 2009, $65,000 in the second quarter, and $90,000 in the January through March quarter. (Fourth-quarter lobbying expenditures haven’t been filed yet.)

Chesapeake Appalachia spent $76,000 in the third quarter of 2009, $79,000 in the second quarter and $48,000 in the first.

Lobbying and umbrella trade groups — such as the Independent Oil & Gas Association, the National Fuel and Gas Association — also make direct campaign contributions.

Individually, none of the energy and gas companies give enough to rank among the top contributors in the state, and collectively, they are still well short of the largest donors, such as PACE, the Pennsylvania State Education Association’s political arm.