HARRISBURG, PA — Democratic lawmakers this week unveiled legislation that would impose a severance tax on natural gas production in Pennsylvania, reviving a long-running debate over whether the state is shortchanging itself as energy companies extract billions of dollars’ worth of gas from the Marcellus Shale.
State Reps. Chris Pielli of Chester County and Tarik Khan of Philadelphia said the bill would establish a per-volume severance tax on natural gas operations, bringing Pennsylvania in line with other major gas-producing states such as Texas, Louisiana, and Ohio.
Pielli said the comparison with Texas is particularly stark. While Pennsylvania and Texas both rank at the top nationally for natural gas production, Texas collected $2.13 billion in severance tax revenue in 2024. Pennsylvania, by contrast, averages about $200 million annually through its existing per-well impact fee.
Pennsylvania’s impact fee, Pielli said, is unusual among gas-producing states and has long drawn criticism for favoring shale producers rather than maximizing public benefit.
“The Marcellus Shale is our natural resource,” Pielli said. “As such, we should not only suffer its impacts but share in its benefits with a fair severance shale tax to benefit our schools, our seniors, our streets and for the service and support that every Pennsylvanian truly deserves.”
He argued that the legislation would ensure large energy companies contribute more equitably to communities affected by drilling and to statewide priorities, calling it overdue that “these multi-billion-dollar companies pay their fair share.”
Khan echoed that message, saying Pennsylvania has failed to fully capitalize on the value of its natural gas resources while profits flow elsewhere.
“Pennsylvania has been getting ripped off while gas is pulled from our ground and profits flow out of state,” Khan said. “A severance tax is common sense and ensures that money is invested back into our schools, infrastructure and communities.”
Under the proposal, the state’s existing impact fee would remain in place, allowing counties and municipalities directly affected by drilling to continue receiving revenue. To address concerns from the industry about overlapping costs, the bill would also provide credits against the severance tax for producers who pay the impact fee on time, reducing the risk of what lawmakers described as double taxation.
Supporters of the bill said the combination of a severance tax and the existing fee would allow Pennsylvania to capture significantly more revenue from gas production while still directing funds to local governments dealing with the environmental and infrastructure effects of drilling. Opponents, including industry groups, have historically warned that a severance tax could discourage investment and cost jobs, setting the stage for another contentious fight in the Capitol.
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