* Penn. Gov. says industry won't discuss tax proposal
* Governor says industry losing public opinion battle
By Ed Stoddard
DALLAS, March 25 Pennsylvania Governor Edward
Rendell told an energy conference on Thursday that he invited
energy companies to discuss his proposed tax on drilling in the
natural gas-rich Marcellus Shale, but got few takers.
In his 2010 budget plan unveiled in February, Rendell
proposed taxing companies that extract natural gas from the
Marcellus Shale. A tax could generate hundreds of millions of
dollars in revenue for the cash-strapped state.
Rendell wants to charge drillers 5 percent of the value of
gas at the wellhead plus 4.7 cents per 1,000 cubic feet of gas
taken from the ground, starting July 1. The plan would raise
$160.7 million in the first year and $1.8 billion over five
"I invited every one of the drilling companies to a retreat
at the Governor's residence to talk ... about many things,
including the severance tax," Rendell told the conference on
natural gas, sponsored by the George W. Bush Institute and
Southern Methodist University's Maguire Energy Institute.
"Only one of the major drilling companies said they would
come," Rendell said. "Now I have not said that publicly, if I
told the people of Pennsylvania that there would be a sense of
The "severance" tax is modeled on that used in West
Virginia, where gas production rose 20 percent from 2002 to
2007, indicating that the tax is no deterrent to development,
Rendell has said.
The Marcellus, which underlies about two-thirds of
Pennsylvania and parts of surrounding states, is estimated to
contain enough gas to satisfy total U.S. needs for 20 years.
The tax proposal must pass the state legislature and could
face opposition in the Senate, which is controlled by the
Republicans. The Democrats control the lower house.
Oil companies are losing the battle for public opinion,
"Public opinion has begun to turn against (natural gas)
drilling ... and the industry continues to make mistakes,"
Rendell said, noting environmental worries such as diverting
water and despoiling natural areas.
Removing gas from shale rock accounts for 15 to 20 percent
of U.S. natural gas production and provides a relatively clean
U.S. energy source.
But there are environmental concerns about a drilling
technique called hydraulic fracturing which environmental
groups say is a threat to drinking water supplies.
(Editing by David Gregorio)