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A Natural Gas Severance Tax C. Daniel Hassell Acting Secretary of Revenue

A Natural Gas Severance Tax C. Daniel Hassell Acting Secretary of Revenue. Severance Tax Background. Why a severance tax? Compensation for removal of a non-renewable resource Compensation for environmental damage Compensation for infrastructure costs. State Severance Taxes.

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A Natural Gas Severance Tax C. Daniel Hassell Acting Secretary of Revenue

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  1. A Natural Gas Severance Tax C. Daniel Hassell Acting Secretary of Revenue

  2. Severance Tax Background • Why a severance tax? • Compensation for removal of a non-renewable resource • Compensation for environmental damage • Compensation for infrastructure costs

  3. State Severance Taxes • 38 states have a severance tax • 28 states have a natural gas severance tax • 22 states have a percentage of value as one component • Pennsylvania is the 15th largest gas producing state, but is the only state with significant natural gas production that does not impose a severance tax.

  4. How Severance Taxes Work • Difference from sales tax: • Source vs. Destination • Per Unit vs. “Ad Valorem” (or percentage of value) Base • Some states have exemptions or lower rates for “stripper wells” or high-cost gas

  5. State Tax Rates • Texas: 7.5% • Wyoming: 6% • Oklahoma: 7% • West Virginia: 5% + 4.7 cents/MCF • Pennsylvania: none

  6. Proposed Severance Tax • Proposal: 5% + 4.7 cents/MCF • Monthly tax payments to state • Matches the WV rate

  7. Legislation • House Bill 1489 • Exempts stripper wells under 60 MCF/day • Estimated First Year Revenue: $72 million • $30 million General Fund • $20 million Environment & Local Gov’t

  8. Conclusion Questions?

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