Tiered severance tax could destroy oil and gas industry
The Independent Oil and Gas Association of West Virginia (IOGAWV) provides a voice for West Virginia’s oil and natural gas industry – including producers who live, work, contribute to and cast their votes in West Virginia.
Despite what people may think or hear, producers in this state are experiencing the lowest natural gas pricing environment we have seen in generations. Combine that with increasing gas transportation and processing costs, regulatory compliance costs, operating costs, severance taxes and a flawed property tax formula, and many producers are operating in the red.
While producers are struggling to thrive, Governor Jim Justice now has proposed a tiered severance tax on natural gas that consists entirely of increases, beginning with a floor that matches the current 5% rate. This proposal provides absolutely no relief to an industry facing hard times and essentially “kicks us while we are down”.
Natural gas development poses the best short term fix to our state’s current economic situation. Instead of creating jobs and improving the economy, as was the basis of Governor Justice’s campaign, this bill discourages growth, kills jobs and could crush an entire industry. This will drive investment for mineral development to surrounding states with more reasonable severance taxes and reduce the likelihood of royalty owners seeing any income from new wells being drilled.
Independent producers are strong willed and resilient during tough times. Producers have done their part by cutting down drastically and becoming more economically efficient. The natural gas pipeline companies have done their part, seeking approvals of new projects and installing new infrastructure to get our natural gas to better markets. And just when forecasts are optimistic about the future of the industry, this bill comes into play, eliminating any potential gains achieved from the efforts of producers and pipeline companies. Proposing a tiered severance tax system during a time of historically low natural gas pricing proves that some of our elected officials do not understand the energy market. West Virginia producers are attempting to dig themselves out of an incredibly deep hole, but the Governor is trying to take away the shovel.
It’s time for our legislators to do their part! I strongly urge the House of Delegates and Senate to reject the Tiered Severance Tax proposal on natural gas.
This op-ed was written by Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia (IOGAWV), and appeared in the West Virginia Press Association newsletter. Click here to read it on the WVPA website.