Pennsylvania, Ohio and West Virginia wisely agreed last week to cooperate in many ways to make the most of the Marcellus and Utica shales gas development. But the agreement signed by Gov. Tom Wolf, West Virginia Gov. Earl Ray Tomblin and Gov. John Kasich of Ohio does not address taxation, a major issue across the gas field.
The compact pledges the states to cooperate in developing markets for shale gas, attracting new businesses, expanding gas-related infrastructure including pipelines, and encouraging state-owned and state-affiliated universities to collaborate on gas-related research.
All of that is sensible. Economic markets and job markets are not defined solely by state borders, and infrastructure development has to comport with boundaries of the gas fields and their markets, rather than with state borders.
Addressing taxation within the context of the compact would benefit all of the governments and taxpayers in all three states. It would eliminate the fiction that a fair extraction tax would cause the industry to pull up stakes.
Only state with no tax
Pennsylvania remains the only major gas-producing state without such a tax. Industry acolytes in the Legislature claim that the industry will leave Pennsylvania if it enacts a tax comparable to those in other states.
In addition to working together on market development and other aspects of the gas enterprise, the states should agree to a common severance tax rate. Doing so would establish cost certainty for the industry while precluding it from playing one state against another for the best tax deal. In the process, all three states would receive reasonable amounts of revenue based on extraction levels.
As noted in the Regional Cooperation Agreement, the U.S. Energy Information Administration has reported that 85 percent of the growth in U.S. gas production since 2012 is due to production in the three states. The EIA also estimated that the Marcellus Shale alone will yield up to 147 trillion cubic feet of natural gas by 2040. Meanwhile, a consortium of universities in the three states has estimated that Utica Shale production eventually could be greater than that of the Marcellus Shale.
That growth entails many economic benefits for the region. All three states should reach an accord on fair taxation to maximize the benefit.
This article was from The Times-Tribune, Scranton, Pa. and was legally licensed through the NewsCred publisher network.