Natural gas drilling rig -WHYY photo by Lindsay Lazarski
States at the center of the recent oil and gas boom should prepare for the inevitable bust and put drilling revenues into permanent trust funds, says a new report from the Metropolitan Policy Program at Brookings.
Marie Cusick reports in StateImpact:
The researchers singled out Pennsylvania and argue it should enact a severance tax on gas production. Drillers currently pay a per-well impact fee, which has generated more than $860 million over the past four years. This year the fees are expected to bring in $185.5 million– the lowest amount ever.
“Pennsylvania would be wise to levy a severance tax on its oil and gas industry and deposit a portion of that in a permanent trust fund,” the authors write.
They note taxes from oil and gas development are affected by global energy markets and become a volatile revenue source if they are not in a well-managed fund. They also cite what’s known as the “resource curse,” in which economies based on natural resources grow more slowly than diverse economies.