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Prattsburgh Town Councilman Steven Kula
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7/29/2008
New York State Should Enact a Natural Gas Depletion Tax
The newly discovered natural gas reserves in the deep layer of rock of the Marcellus Shale, which lies under the Southern Tier, are potentially worth more than $70 billion. On Wednesday, Gov. David Paterson signed a bill making it easier for companies to drill for natural gas. Unfortunately, he didn't sign a bill to make it easier for the public to benefit from this drilling.

Unlike the majority of states, New York lacks a natural resource depletion or severance tax. Thus, soaring gas prices and dramatically expanded recoverable reserves will do little to replenish shrinking public budgets. If New York were to impose a tax similar to that of other top natural gas producing states, public services could receive nearly $500 million in additional annual revenue. This revenue could prove critical in maintaining a high level of public services in a time of rising unemployment, soaring food and energy prices and a massive housing crisis.

Many states distribute depletion tax revenue directly to local governments experiencing the associated environmental and economic costs of drilling. As more wells are drilled, increases in reports of incidents involving gas wells will follow. Last year, an accident at a nearby natural gas drilling site left dozens of homeowners in Brookfield without drinking water for days, some for months. Many houses had to be fitted with water purification systems that are costly to maintain.

New York could emulate states such as Alaska, New Mexico and Wyoming and set aside a portion of those revenues in trust funds whose benefit will continue long after the natural gas disappears. New Mexico and Wyoming each draw more than $150 million in annual budget revenue from the interest earned on their funds, while Alaska pays dividends directly to its citizens.

(Click to read entire article)
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