It’s a sign of how badly the gas companies have lost the debate over a severance tax that their argument has now basically shifted to “but..but..the poor landowners!” Here’s Katrina Currie of the right wing Commonwealth Foundation writing in today’s Morning Call:
In many ways, Jacqueline Root, Jim VanBlarcom and other Pennsylvania landowners, farmers, job seekers and consumers would be the real victims of a severance tax on natural gas. While drilling won’t disappear with a tax, the effects will be borne through reduced investment in the state, lower wages, reduction in job growth or a reduction in spending on things like road improvements and philanthropy.
Most people don’t realize a severance tax would hurt Pennsylvanians directly, but a typical lease splits tax obligations between drilling companies and landowners. The industry has paid an estimated $7 billion in lease and royalty payments to residents since 2006 — money that landowners stand to lose.
So apparently we can finally bury the silly argument that gas drillers will flee the state if there’s a severance tax. Now the argument is that there will be reduced investment in drilling. This seems highly doubtful. If it’s profitable to drill, gas companies will drill. If it’s not, they won’t. Severance taxes don’t appear to be reducing investment in every other state.
It’s also not clear by what mechanism Currie thinks a severance tax would lower wages or job growth. This just sounds like a ham-handed way to align this issue with the core issues voters are concerned about. But even if a tax led to a reduction in drilling jobs, that’s hardly the end of the analysis. The increase in revenue would mean fewer teacher layoffs, fewer education cuts, and more economic development money for seeding new businesses, infrastructure projects, regional incubators like Ben Franklin Technology, etc. It would be better for the state’s economy to be adding jobs in these sectors than in resource extraction.
It’s true that companies will have less money to do in-kind road repair, but that’s a job for the government. The government will have more money to do road repair. Can Currie show that there would be a net reduction in road repair?
It’s also not clear why we should care about a reduction in philanthropy (i.e. tax-sheltered driller profits). If some of the gas companies’ profits are going to be set aside to benefit the public, it’s clearly better for them to be used in an accountable way, as revenue to preserve public services – not charities chosen by driller-created foundations.
Finally, are we supposed to feel bad that landowners would end up losing some of their royalty payments to taxes? Why? Landowners are responsible for what happens on their property. There are large environmental externalities and public health risks associated with fracking. By signing a lease to let gas companies frack on their land, landowners are enabling potential harms. Of course they ought to be responsible for paying some portion of the severance tax.