28 October 2009

The Art of the Deal

Gov. Joe Manchin's approach toward taxing West Virginia's natural gas industry was invoked by a recent article in The Philadelphia Inquirer to contrast the lack of success by his Pennsylvania counterpart on that front.

The article reports that despite that state's recession woes and resulting budget impasse, its "natural-gas industry's leaders and lobbyists beat back (Gov. Ed) Rendell's proposal to tax gas as it is pulled to the surface from the rich black-rock reservoir known as the Marcellus Shale."

The absence of a severance tax on that resource "makes Pennsylvania unique among the 15 states that produce the most natural gas," the article notes.

While weighing a tax, Rendell said he spoke to Manchin about the Keystone State's neighbor, which "also sits atop the Marcellus Shale and has taxed natural gas for years."

"Rendell said Manchin, a fellow Democrat, had assured him that West Virginia's tax did not 'inhibit gas extraction and that it is continuing at a record pace, and it's reaping critically needed revenues so the state can provide services to its citizens,'" the article said.

Manchin also explained his approach in an interview with the newspaper. As the article recounts:

"The Marcellus Shale is a tremendous producer. A severance tax will not deter" the drillers, Manchin said. "Believe me, if we didn't have the gas, they wouldn't be here."

Manchin said he had faced industry complaints in 2005 when he proposed to expand the tax, with some companies threatening to leave.

He offered to have the state buy up their leases "so you don't lose one penny." No one took him up on his offer.

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