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Responsible Growth: Protecting Public Interest with a Natural Gas Severance Tax

Within the next decade, Pennsylvania is poised to enjoy a natural gas development boom. Long-term projections of rising natural gas prices and the advent of advanced drilling techniques have made it economically feasible to extract natural gas from the Marcellus Shale, a deep geologic formation that underlies 54 of the 67 counties of Pennsylvania.

Natural gas development will likely bring jobs, investment, and money into Pennsylvania, but it will also impose additional costs on state and local governments and their taxpayers. These costs include environmental permitting, monitoring, and cleanup, as well as worker and public safety in and around wells, emergency response, road maintenance, and demand for specialized water treatment facilities.

 Evidence also suggests that the civic response to natural gas and other mineral booms is to overestimate the benefits and underestimate the impacts — on the environment, rural communities, and the public coffers.

Every state with significant mineral wealth, with the exception of Pennsylvania, has adopted a severance tax on the resource extraction industry. A severance tax is a well-tested mechanism for ―internalizing‖ the external costs of drilling that are not currently paid by natural gas producers. Without a severance tax, these costs will be shifted to other state and local taxpayers.


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