Lindsay Hoskins: Severance Taxes: Better for a state overall, but not to those who are directly impacted

While Pennsylvania uses Act 13, other states capitalize on fracking by using severance taxes. Severance taxes ensure that gas companies must pay for costs associated with gas extraction on a state level. Projects such as road construction and environmental protection are included and they impact what companies must pay for so taxpayers do not have to. "States distribute revenues in various ways, but typically, most of the collected taxes are deposited into the general fund. Many states also use the extra revenue to fund conservation and environmental cleanup projects and distribute portions of the collected taxes to local governments" (Pless, 2012). In 31 states, severance taxes are imposed on gas and oil companies, but Pennsylvania, one of the largest natural gas-producing states does not have a severance tax. The Pennsylvania Budget and Policy Center has estimated that the absence of the tax has cost Pennsylvanians $300 million in potential money earned. With a projected 11,500 wells probably operating by 2020, Pennsylvania is expected to lose at least $24 billion in gas revenues over the next 20 years (PA Budget and Policy Center, 2012).

While Act 13 may seem to be cheating Pennsylvania out of money, it is overall beneficial to those who are directly affected by fracking. Unlike severance taxes that go to the state, much of the money from Act 13 goes directly to the local areas affected. Act 13 money is more beneficial in areas of heavy drilling because they directly receive the money. Each year different fees will be due by gas companies. In 2013 companies must pay $45,000 per horizontal well, $9,000 per vertical well, along with fees of wells already in place” (Sacavage, 2012). Chart 2 demonstrates how the money is going to the places that need it to restore and repair their environment and infrastructure being affected. These counties listed below are being compensated because they are heavily drilled, or heavy impact areas from drilling in Pennsylvania.