Inside Democrats’ Plan to Oust Pennsylvania’s Governor

National Journal
Jason Plautz and Ben Geman
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Jason Plautz and Ben Geman
April 14, 2014, 3:43 p.m.

HAR­RIS­BURG, Pa. — Tom Corbett is very proud of Pennsylvania’s frack­ing boom, and the Re­pub­lic­an gov­ernor hopes to ride it to a second term in of­fice.

Demo­crats have oth­er plans: They think they can use the boom — or rather, Corbett’s hand­ling of it — to oust the in­cum­bent.

And therein lies the en­ergy mes­saging war of this state’s hotly con­tested gubernat­ori­al race. Corbett says he’s been a cata­lyst for jobs and de­vel­op­ment tied to the state’s nat­ur­al-gas pro­duc­tion surge. But Demo­crats say the gov­ernor’s cozy re­la­tion­ship with the in­dustry is leav­ing cit­izens on the short end of the stick as the state gives up its gas sup­plies.

To that end, every Demo­crat in the crowded primary race want en­ergy com­pan­ies to pay a new tax on their nat­ur­al-gas pro­duc­tion. The pro­ceeds from the pro­posed “sev­er­ance” tax on the value of gas pro­duced would help fund edu­ca­tion, in­fra­struc­ture, and oth­er needs.

Many oth­er en­ergy-pro­du­cing states have such a policy, and Demo­crats ar­gue that by re­fus­ing to push for one in Pennsylvania, the gov­ernor is giv­ing en­ergy com­pan­ies a break at the ex­pense of oth­er crit­ic­al needs.

The party thinks it’s a win­ning line of at­tack. “I’ve seen a lot of in­tern­al polling. There’s a reas­on that all the can­did­ates are talk­ing about it,” said Dan Fee, a Demo­crat­ic con­sult­ant who is not af­fil­i­ated with any can­did­ates.

The tax battle is play­ing a prom­in­ent role in the ef­fort to un­seat the vul­ner­able Corbett, who as of Feb­ru­ary held a 36 per­cent ap­prov­al rat­ing and trailed his Demo­crat­ic rivals in a Quin­nipi­ac Uni­versity poll.

Wheth­er or not Demo­crats’ en­ergy at­tacks are suc­cess­ful, the fact they are em­ploy­ing them at all un­der­scores the changes frack­ing has brought to the state.

Only a dec­ade ago, the no­tion that nat­ur­al-gas policy would play a prom­in­ent role in a Pennsylvania gubernat­ori­al race would have seemed ludicrous. But as in areas across the coun­try af­fected by the frack­ing boom, the spike in en­ergy de­vel­op­ment has re­defined not only the state’s eco­nomy, but also its polit­ics.

Com­pan­ies tap­ping the rich Mar­cel­lus shale form­a­tion have made this the coun­try’s third-largest gas-pro­du­cing state in 2012, and ac­cord­ing to state of­fi­cials, Pennsylvania vaul­ted past Louisi­ana for the No. 2 slot last year. That’s up from sixth as re­cently as 2011 and four­teenth in 2008, the year the Key­stone State’s frack­ing-en­abled gas boom took off, ac­cord­ing to the fed­er­al En­ergy In­form­a­tion Ad­min­is­tra­tion.

With all that pro­duc­tion, Demo­crats see an av­en­ue for rev­en­ue.

The sev­er­ance tax came up quickly when three of the four Demo­crat­ic can­did­ates squared off at a de­bate at Widen­er Uni­versity’s law school here in the state cap­it­al last Wed­nes­day.

“When I go around the state, this is a really pop­u­lar is­sue, and es­pe­cially if you are go­ing to use [a tax] to fund something like pub­lic edu­ca­tion,” said Tom Wolf, the state’s former rev­en­ue sec­ret­ary who is ahead of his primary rivals and Corbett in re­cent polls.

Wolf has pro­posed a 5 per­cent sev­er­ance tax for drillers, as have his fel­low primary can­did­ates Katie Mc­Ginty, a former head of the state’s De­part­ment of En­vir­on­ment­al Pro­tec­tion, and five-term Rep. Allyson Schwartz. The can­did­ates say that would be com­pet­it­ive with Mar­cel­lus-re­gion neigh­bor West Vir­gin­ia. And more broadly, many oth­er oil-and-gas-pro­du­cing states have sev­er­ance taxes.

State Treas­urer Rob Mc­Cord has pro­posed a 10 per­cent tax.

All the cam­paigns say their plan would provide a ma­jor boost for state cof­fers. For in­stance, Schwartz’s cam­paign, cit­ing fig­ures from the left-lean­ing Pennsylvania Budget and Policy Cen­ter, es­tim­ates that her plan would bring in over $600 mil­lion in its first year and reach over $2 bil­lion in a dec­ade.

Corbett un­abashedly op­poses a sev­er­ance tax. In­stead, he ar­gues his policies foster de­vel­op­ment while bring­ing in sub­stan­tial rev­en­ue.

He’s tout­ing state “im­pact fees” for each well that drillers pay un­der a Corbett-backed 2012 state law that over­hauled the state’s oil and gas rules.

The total fees — which fund in­fra­struc­ture, en­vir­on­ment­al, and oth­er state and loc­al pro­grams — are ex­pec­ted to be $225 mil­lion this year and totaled an­oth­er $406 mil­lion over the pri­or two years, ac­cord­ing to the Corbett ad­min­is­tra­tion.

Sixty per­cent of the money goes dir­ectly back to counties where drilling oc­curs.

“Gov­ernor Corbett has worked to en­sure we are safely and re­spons­ibly us­ing our nat­ur­al re­sources to re­duce en­ergy prices for fam­il­ies and small busi­nesses, grow our eco­nomy, and cre­ate fam­ily-sus­tain­ing jobs,” said Corbett cam­paign spokes­man Billy Pit­man.

“Our lib­er­al Demo­crat­ic op­pon­ents have nev­er seen a tax in­crease they didn’t like,” he said. The Corbett cam­paign last year blas­ted then-front-run­ner Schwartz when she pro­posed her sev­er­ance tax, ar­guing that it would “tax the in­dustry out of our state.”

And the state’s power­ful nat­ur­al-gas in­dustry is in Corbett’s corner. The Mar­cel­lus Shale Co­ali­tion, an in­dustry group, said adding new taxes would jeop­ard­ize the “shared, broad-based be­ne­fits” from the state’s gas boom. The group, which rep­res­ents gas pro­du­cers like Ches­apeake En­ergy, Range Re­sources, and Ex­xon sub­si­di­ary XTO En­ergy.

Even if Demo­crats are suc­cess­ful in their en­ergy mes­saging, con­cen­trat­ing solely on frack­ing would be a fool’s er­rand: Late March polling by the Cen­ter for Opin­ion Re­search at Frank­lin & Mar­shall Col­lege shows that just 5 per­cent of Demo­crat­ic voters list en­ergy is­sues as the most im­port­ant thing fa­cing the state’s voters today.

But the same poll sug­gests the can­did­ates could tap much deep­er in­to the pop­u­lar in­terest by con­nect­ing the is­sue to edu­ca­tion, as 32 per­cent of re­spond­ents called fund­ing for schools a top pri­or­ity.

“The Demo­crats have made a big deal of the sev­er­ance tax be­cause most of them want to use it for edu­ca­tion fund­ing,” said G. Terry Madonna, head of Frank­lin & Mar­shall’s Cen­ter for Polit­ics and Pub­lic Af­fairs and dir­ect­or of the polling.

Ul­ti­mately, however, a sev­er­ance tax may be a polit­ic­al battle that nev­er ma­ter­i­al­izes in­to policy. Even should a Demo­crat take the state’s highest of­fice, Madonna cau­tions that sev­er­ance taxes would face an up­hill battle in the state’s GOP-con­trolled le­gis­lature.

The state’s con­ser­vat­ive House is un­likely to pass the meas­ure, Madonna said, adding he was doubt­ful the tax could sur­vive even in the state’s more mod­er­ate Sen­ate.

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