Published in the Wyoming County Examiner, by Jeffrey Horvath

August 20, 2014

A financial adviser told a Wyoming County Chamber of Commerce luncheon last Wednesday that he believes an impact fee is the most appropriate way to collect and redistribute monies from the natural gas industry.

Edgar Warriner, a native of Wyoming County and part of the Elk Advisors Group which “helps businesses grow strategically and with a purpose,” spoke to the luncheon at Shadowbrook Inn & Resort and contended that the adoption of a severance tax will increase the cost of producing natural gas in Pennsylvania, thereby giving gas companies a reason to extract and produce natural gas somewhere else.

Warriner’s argument revolved around the notion that the presence of natural gas companies has invaluably benefitted local businesses and the local economy, and he emphasized the importance of giving the natural gas companies an incentive to continue to catalyze economic growth in our area. “Energy companies have choices,” he said, “they don’t have to stay here, they don’t have to employ our people. If you increase the cost of producing natural gas, the companies have cheaper choices that they could exercise. If we jack up the severance tax, their profit shrinks, and their incentive to go elsewhere increases.”

Despite the fact that Pennsylvania is the only gas producing state that has not imposed a severance tax on the natural gas industry, it has the second highest corporate tax rate in the country at 9.99 percent (the highest in the energy producing sector). Warriner pointed out that, between 2013 and 2014 alone, Pennsylvania’s Corporate Income Tax revenue increased by 20.2 percent. Of course, this statistic does not represent only the natural gas industry, but all institutions paying corporate income tax.

“At the end of the day,” said Warriner, “these businesses are already being taxed. If we continue to make it more expensive for these companies to do business here, they’ll go somewhere else.”

Warriner’s argument comes on the heels of Democratic Gubernatorial candidate Tom Wolf’s proposal of a five percent severance tax on natural gas produced in Pennsylvania, which would be used to fund education, as well as road projects and renewable energy technology.

During a question and answer segment, one attendee asked Warriner, “If our budget is underfunded and we need to fund education, where will the money come from?”

Warriner said that he “wishes he had the answer to that question, but the answer is not to impose a tax that will send monies and businesses elsewhere.”

A second argument furthered by Warriner at the luncheon concerned the differences in how severance tax monies and impact fee monies are distributed. “Severance tax dollars are deposited into the general fund,” argued Warriner, “while 60 percent of impact fee money is returned to the gas-producing areas.” He continued by saying that a severance tax would effectively be a way of redistributing money gas money from the northeast corner of the state to Pennsylvania’s metropolitan areas, while impact fee money remains local.

Pennsylvania currently has a $1.5 billion budget gap, and a severance tax of 5 percent has the potential to garner billions of dollars in revenue over a period of several years.

Warriner estimated that a five percent severance tax on natural gas would garner nearly $720,000,000 in revenue this year.

That being said, he adamantly rejects the idea that a severance tax is the right way for the state to address its budget crisis.

“From the perspective of someone who looks out for area businesses,” he concluded, “we want to give these companies every reason to stick around.”

The Chamber’s educational luncheon series was sponsored by People’s Security Bank, Tyler Memorial Hospital, the P&G Mehoopany Employee’s Federal Credit Union, and the Mehoopany Wind Farm.

(Jeffrey Horvath, "Speaker touts pluses of impact fee," Wyoming County Examiner, 8/20/14)