Stamatakis: The genius of Gov. Corbett’s drilling plan

It’s not every day that you’d call a new Harrisburg bill thrilling.

But then again,… It’s not every day that you’d call a new Harrisburg bill thrilling.

But then again, it’s not every day that the capital produces something as glorious as Gov. Tom Corbett’s Marcellus Shale drilling plan. The proposal is cause for running around campus with ribbons.

If enacted, the bill would allow counties to levy up to $160,000 in fees over 10 years for new wells. Seventy-five percent of all money collected will stay in the county where drilling occurs, and the other 25 percent will go to the state, which will use the money for well inspection and road and bridge repair. Further environmental restrictions will also be placed on new wells.

Although it might just sound like accounting technicalities, this allotment system ensures that our state is one of the best-positioned in the nation to dispel the negative effects of drilling while profiting from a thriving natural-gas industry. The people who suffer the most from drilling — rural Pennsylvanians — will finally see some restitution. Truly ribbon worthy.

In fact, measures that address the plight of rural citizens are rare among these plans. Instead of taxing a fixed amount as the Corbett plan proposes, other states tax on a percentage basis; thus, their revenues are largely determined by the price of natural gas. West Virginia, one of the nation’s largest drillers, has experienced financial stress as a result of one such plan. With natural-gas prices at historic lows, partially because of the rapid explosion of hydraulic fracking across the country, the state’s drilling revenues have decreased by about 35 percent, according to the West Virginia State Tax Department.

The problem here is that while tax allotment has decreased, the negative effects of drilling haven’t. Stress on local infrastructure and possible environmental contamination from waste-water storage ponds don’t cost less to deal with simply because natural gas is cheaper. A flat, guaranteed rate is safer.

The other significant aspect of the bill — the emphasis on local revenue rather than state revenue — is important because drilling’s negative social and environmental effects are very geographically concentrated. Pittsburgh and Philadelphia don’t suffer any of the detrimental consequences of this procedure, and thus have much less legitimate claim to any of the spoils.

Also, by keeping taxes at a local level, municipalities and counties that don’t want to stomach the costs of drilling won’t be able to free-ride on the benefits. If local citizens decide to outlaw drilling, as residents of nearby Peters Township have proposed, they will be doing so knowing they are forgoing some serious revenue.

By attaching municipalities directly to revenue in this way, better decisions will be made across the state on whether or not to permit drilling. Much in the same way students spend their own money more prudently than their parents’ money, local governments will be much better at making decisions without a guaranteed state benefit every month.

Localizing benefits and maintaining flat rate taxes seem like obvious choices, but most other states do not have similar programs. A 2009 Pennsylvania Budget and Policy Center survey showed that very few states in the country tax using an absolute value rather than percentages. And aside from North Dakota, Wyoming and Alaska, which enjoy far greater deposits than Pennsylvania that can be distributed among far fewer people through complete elimination of sales and property taxes, not all states keep most benefits local. Arkansas uses much of its revenue for roads, whereas Texas sends its money to the general fund. Other states send money to both local and state institutions, but Pennsylvania’s local emphasis certainly puts it on the leading edge.

It appears, then, that Corbett was at least partially genuine when he formed the Marcellus Shale Advisory Commission to study taxes. Though many environmental and political groups, including the aforementioned Pennsylvania Budget and Policy Center, were skeptical of the committee, which did consist of many natural-gas industry insiders, the final product seems to achieve a certain balance.

Of course, the program is not without dissidents. Some Republicans, mainly in the cities, dislike the drastic local allocations. Others see the fees as opposing the “no new tax” pledges they made to be elected. Others still claim, legitimately, that dozens of counties individually extracting taxes is needlessly complicated. And Democrats and environmentalists, who insist the state should try to get more, see this still as a giveaway to natural-gas companies.

But the justification for a tax at all is that drilling hurts local communities more than other similarly sized businesses. The Corbett plan is perfectly equipped to address this key issue. Local governments will be rewarded the resources to deal with the negative effects of drilling, regardless of the market price of natural gas. The state and country at large will continue to benefit from the new jobs and wages.

If the proposal passes, the natural-gas industry will be less of a drain on rural Pennsylvania. Instead, the biggest drain will be a big vertical one to suck gas out of the earth.