2012 — BALTIMORE — House lawmakers Monday night passed a 7.5 percent state severance tax on natural gas in a 82-51 vote, after delegates on Saturday fended off an amendment from Delegate Wendell Beitzel, R-Garrett, that would cap state and local taxes on natural gas extraction at 7.5 percent combined.
“The amendment would incorporate all severance taxes,” Beitzel said. “Local, county and state taxes together could not exceed 7.5 percent.”
Garrett County currently has a severance tax of 5.5 percent, which means the state could assess a severance tax of only 2 percent under Beitzel’s amendment. Allegany County’s severance tax of 7 percent would limit the state’s share to just 0.5 percent.
Higher rates were needed to enforce regulations, proponents say.
Delegate Maggie McIntosh, D-Baltimore City, chair of the House Environmental Matters Committee and a sponsor of the severance tax, said applying different rates to every county would create administrative problems. She also said the 7.5 percent cap Beitzel proposed would not provide enough money for the regulatory oversight needed to protect human health and the environment.
“Limiting the state to .05 percent would be wrong,” McIntosh said. “It’s going to be the state that’s called for environmental cleanup and for other kinds of issues that happen ... when drilling begins.”
McIntosh suggested that Garrett and Allegany counties could lower their severance taxes to make the tax more “reasonable” to gas companies.
The 7.5 percent tax was amended down from 15 percent by the House Ways and Means Committee on March 20 by a vote of 16-5.
The severance tax is primarily aimed at Marcellus shale exploration, which requires the process of hydraulic fracturing, or “fracking,” to free gas trapped in shale formations deep in the Earth’s surface. But the 7.5 percent severance tax will also apply to conventional gas wells that are not drilled using the fracking method.
Fracking has been blamed for contamination of groundwater in Pennsylvania and New York over the last decade, where Marcellus Shale exploration has been the most active.
New York placed a moratorium on fracking three years ago until it could be regulated. Lawmakers there are now poised to lift the moratorium.
Delegate Kevin Kelly, D-Allegany, was concerned that a 7.5 percent state severance tax on top of local taxes would scare away natural gas exploration to neighboring states that charge a much lower severance tax — or none at all.
Pennsylvania has no severance tax and West Virginia recently passed a severance tax of 5 percent.
“I think you should have a severance tax that helps cover the costs of (oversight),” McIntosh responded — pointing to problems with shale drilling in New York and Pennsylvania.
She said the gas companies would still come to Western Maryland, even with the 7.5 percent state severance tax.
Beitzel’s amendment failed by a vote of 43-78.
Marcellus shale drilling could begin as early as August 2014 after the study is complete.
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