Rendell and Marcellus Shale—Taxing the “Golden Goose”

April 26, 2010 | by | Topic: Economics & Political SystemsPrint Print

Imagine that you are governor of the state of Pennsylvania, and private enterprisers discover a new, clean source of fuel within the state’s borders, a source which would help reduce the costs of energy, provide jobs for companies and workers, yield additional tax revenues from existing taxes, and augment local taxes. What response would one expect from the state’s governor? If you are one of the new progressives, like Ed Rendell, governor of Pennsylvania, your immediate response is: “Tax ‘em some more.” Tax the new “golden goose,” even when it has only just begun to lay “golden eggs.”

The new energy source is the natural gas trapped in rock deposits known as Marcellus Shale. These deposits are plentiful in Pennsylvania, Ohio, West Virginia, and New York—but especially in Pennsylvania—and were first thought to be rather insignificant when noticed roughly 10 years ago. However, recent estimates by geoscientists maintain that the Marcellus deposits are significant, maybe containing as much as 50 trillion cubic feet of recoverable natural gas!

Geological entrepreneurs have ingeniously devised ways of tapping this gas, which takes considerable capital investment. All the supporting industries are prospering as they supply the drilling and extraction. If no new taxes were slapped on the gas production, the operations would still yield much needed tax revenues to the Commonwealth as the new enterprises pay already existing Pennsylvania taxes. At the same time, tens of thousands of new jobs would be provided to the depressed Pennsylvania economy; these would not be short-term government jobs, like census workers. The potential here is for decades of employment related to this industry. Wouldn’t those benefits be enough for Governor Rendell to leave the fledging Marcellus Shale extraction industry alone?

Apparently not. Rendell proposes a 5 percent tax on the value of extracted gas and then an additional $.047 per thousand cubic feet of the gas extracted. The Commonwealth Foundation says that the imposition of the tax will reduce Pennsylvania drilling “by at least 30 percent.” That may be an underestimate, but no one knows the entire effect. What we do know is that Pennsylvania’s existing tax climate is not generally hospitable to new enterprises, so why burden this emerging industry and its job-creation potential with yet another tax?

If Governor Rendell wants to claim a policy and budgetary victory, why doesn’t he proclaim that he will veto any new taxes on Marcellus Shale production that come from the legislature? Why doesn’t he say that he will be satisfied with the additional revenues that are already (and will be) paid by these new productive businesses in Pennsylvania? Why doesn’t he refuse to thwart opportunities for workers to gain tens of thousands of private sector jobs that make them able to support their families and pay ordinary taxes well into the 21st century?

Refusing to agree to further taxation is the path to real and lasting “progress,” not the stifling big-government policies of the New Progressives.

John A. Sparks

John A. Sparks

Dr. John A. Sparks is the retired dean of the Calderwood School of Arts & Letters, Grove City College, Grove City, Pa., and teaches constitutional history and business Law on a part-time basis. He is a member of the State Bars of Michigan and Pennsylvania and is a fellow for educational policy for The Center for Vision & Values at Grove City College.

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