Appalachian Basin

*UPDATE (With Video)* Pa. Dept. of Revenue Sets the Record Straight on Industry’s Tax Bill

Here at EID, we’ve always been technology guys; we focus on educating folks on the mechanics of safely and responsibly harvesting clean-burning natural gas from deep reservoirs underground, and holding folks to account when they get those facts wrong (whether by mistake or design).

But that being the case, we just couldn’t let pass without comment an article in today’s Pittsburgh Post-Gazette on taxes – a must-read piece that offers up a wholesale debunking of a recent report prepared by a political advocacy group in Harrisburg arguing that the natural gas industry in Pennsylvania doesn’t pay all that much in state and local taxes … notwithstanding the fact that it remains the only real job creation engine in action right now in the commonwealth.

Well, a week after that slanted report was published by the Pennsylvania Budget and Policy Center (PBPC), the Pennsylvania Dept. of Revenue released its own report this week. And wouldn’t you know it? According to the state, natural gas producers paid more than $1.1 billion in state taxes over the past five years, with the revenues “from the first quarter of this year already exceed[ing] by nearly $20 million the total tax payments made in all of 2010,” according to the Revenue Office.

To its credit, today’s edition of the Post-Gazette includes a write-up on the Dept. of Revenue report. Not to its credit, the paper’s editors decided to bury the story so deeply that we actually needed to enlist advanced fracture mapping technology to ferret the thing out. Here’s the story’s lede (after the jump):

Striking back against a report that it says undercuts the amount of taxes paid by gas drillers, the state Department of Revenue on Monday afternoon released its own set of tax figures.

That data, dating to 2006, credits the drilling industry with sending more than $219 million to state coffers last year. The total includes two key business taxes — the corporate net income tax and the capital stock and franchise tax — as well as sales and employee withholdings that companies submit.

An early look at this year’s taxes already shows more than $238 million in payments from companies extracting natural gas and their direct suppliers, said Acting Revenue Secretary Daniel Meuser. In an interview, he said the data showed that gas drillers “pay the same level of taxes as any business in the state.”

Of course, notwithstanding PBPC’s reliance on old data and bad assumptions as the foundation of its report (where have we heard this before?), turns out that the “think tank” completely ignored in its report the myriad indirect benefits that natural gas development delivers to the state and its residents each and every day. Stuff like royalties for landowners, and fees for state agencies. Money for roads and infrastructure. Charitable gifts to schools and watershed associations.

Thankfully, those things didn’t escape the eye of the Commonwealth Foundation’s Katrina Currie, who took to the pages of the Philadelphia Inquirer this week to provide the context that the folks over at PBPC worked like heck to obfuscate:

The report also glosses over how much the gas industry is already contributing to government, including an estimated $100 million in state and local taxes directly from industry, another $300 million in taxes from indirect activity, and $64 million in royalties to the state from drilling on state-owned lands this fiscal year. The gas industry covers the entire cost of environmental monitoring through drilling fees to the state’s Department of Environmental Protection. Finally, gas companies spent more than $200 million in 2010 to repair and improve local roads.

UPDATE (5/5/11; 4:31 p.m. EST)

Fun little video put together on this issue by our friends over at the Commonwealth Foundation — click here to view. Also worth taking a look at a fact sheet released by the group this week, just in case you’re interested in getting the full context on the tax issue.


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