Pennsylvania is considering imposing a five percent severance tax on producers working in the state and a $3 million per well fee for drill sites in state forest lands.
A severance tax is imposed on the removal of hydrocarbon and gas resources such as crude, natural gas, coal bed methane and carbon dioxide.
Democratic gubernatorial nominee Tom Wolfe said if elected he will support the tax.
“With natural gas production at an all-time high, a reasonable five percent severance tax would generate over $1 billion in 2015,” Wolf said.
Operators in Pennsylvania already pay an impact fee that has generated more than $630 million since 2011.
The Pennsylvania Independent Oil and Gas Association said the tax and fee could push producers out of the state.
“Pennsylvania’s gas industry is paying more than its fair share of taxes, including an estimated $2 billion in state and local taxes since 2007,” PIOGA president Louis D. D’Amico.
D’Amico said producers in Pennsylvania are already feeling strained by changes to state regulations increasing the cost of operating in the state and lower commodity prices.
Pennsylvania sits on top of the Marcellus Shale formation, the largest shale gas play in the United States.
As of 2012, Marcellus had proved reserves of 72 million barrels.
An analysis conducted by the state’s Independent Fiscal Office said Pennsylvania has one of the lowest effective tax rates on shale gas extraction in the country.
However, the state also has the second highest corporate net income tax in the United States.
Republican incumbent Tom Corbett opposes the severance tax but said he would keep the impact fee if re-elected.