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Post by Dutch on May 17, 2015 9:30:07 GMT -5
Royalty Owners Pay Their Share of the Gas Severance Tax
Just as the Operator and other Working Interest parties must pay their pro rata share of gas severance taxes, so must the royalty owners. Royalty owners will notice this deduction shown on their monthly royalty revenue statement. For further reading on this, see the article Oil and Gas Royalty Statement.
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Post by bawanajim on May 17, 2015 9:43:39 GMT -5
Once again, every other petroleum energy producing state, other than PA, has a severance tax. It's a fact that PA's only "world class" petroleum energy product right now is natural gas. It's a fact that the majority of homes in PA that are using petroleum products for heat are using oil and kerosene - almost all of the severance taxes on those products are flowing from PA to other states! Whenever anyone, private or commercial, fills up their vehicle with diesel or gas, they're paying a severance tax to a state other than PA due to the fact the production of distillable oil in PA is negligible compared to the other states. We are, BY FAR, paying a huge amount of severance taxes, in the form of costs already built into the market price, to states other to PA! PA enacting a severance tax will allow the residents of the Commonwealth to benefit by offsetting some of the HUGE amount of severance tax imbalance now flowing from our state to every other energy producing state! So this is a case where being "Lemming like" is a beneficial action and all of Pennsylvanians will be better off, much unlike Corbetts gas tax to fix our roads and bridges? More taxes = more good? Thats a strange concept, unless sharing the pain is the goal.
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Post by timberdoodle on May 17, 2015 9:59:31 GMT -5
Blue a severance tax is paid at the state from where the severance took place not where the product ended up...
You are not paying a severance tax when you fill up... You're paying state and federal tax but not to the state or country from which the gas or diesel came from..
So your post is just wrong.
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Post by Dutch on May 17, 2015 10:06:24 GMT -5
I think I'll post this again.
Low nat gas prices stifle production, even in states that already have taxes.
April 2011 900 gas rigs operating in the US.
Last week, 288 or so.
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Post by Deleted on May 17, 2015 10:13:21 GMT -5
Actually, Jim, if PA were to enact a severance tax I would expect to see the market price of NG not move at all on that news alone. The overall flow of revenues would just shift to the Commonwealth's benefit. BTW, to all seeking fairness in taxes; I don't think it will ever happen. Is it really, really fair that some landowners got much better lease/royalty agreements from the energy companies than others based on timing, location and representation? Life's not fair! Get used to it! Like I answered you before, I have yet to see anyone give a damn about the income/capital gain taxes I pay in my business. It's all about "whose ox is being gored"!
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Post by dennyf on May 17, 2015 10:17:29 GMT -5
That "every other NG producing state has a severance tax" bromide, doesn't really impress me all that much.
PA has an impact fee, which is similar to some of the severance taxes imposed in other states. So to flatly state that drillers are getting away with something here, does not reflect reality.
One reason why Wolf's determination to "convert" to a severance tax, is the past history of PA Democrat Administrations generously doling out tax funds to deal with inner city issues. Not that such issues don't deserve attention, but it tends to become one sided. And as recent voting indicates, the votes are in these cities, not in rural PA.
The result of which historically, has often been at the expense of seeing that rural areas get what some might call their "fair share" of both funding and attention, in general.
Which brings us back to the current impact fee, much of which has been directed to those very rural areas most affected gas drilling.
Or in the words of the Twp. Supervisors in the area where my camp is: We're now seeing some much-appreciated (NG) money from Harrisburg. Once they change to a severance tax arrangement, we worry that will cease and the bulk of the money will again go to Philly.
So argue about what system of extracting funds from the NG industry "benefits" whichever entity one thinks is on which end of the stick. In my opinion, the current system suits me fine.
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Post by Deleted on May 17, 2015 10:21:56 GMT -5
Blue a severance tax is paid at the state from where the severance took place not where the product ended up...
You are not paying a severance tax when you fill up... You're paying state and federal tax but not to the state or country from which the gas or diesel came from..
So your post is just wrong.
OK, so the landowners/energy companies just pay it out of the "good of their heart"? LOL! That tax, as a cost of production, has a direct impact on the market price of petroleum products! That market price determines the cost of energy nationwide. I'm really sorry if some landowners didn't have good representation and/or business sense when they signed their contracts with the energy companies.
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Post by Deleted on May 17, 2015 10:58:45 GMT -5
Or in the words of the Twp. Supervisors in the area where my camp is: We're now seeing some much-appreciated (NG) money from Harrisburg. Once they change to a severance tax arrangement, we worry that will cease and the bulk of the money will again go to Philly.
Denny, You've a good point there! That single issue is what keeps me from supporting the current push to shift school funding from a locally controlled, stably based property tax to an income tax/sales tax based system, subject to shifts in economic conditions, that will be controlled by those in power in Harrisburg. Nothing good can come from that as the majority of our legislators come from urban areas!
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Post by Dutch on May 17, 2015 11:23:52 GMT -5
The severance tax is pretty much for one thing, a bandaid on the pension system.
Instead of facing hard choices, and fixing it right, both parties will increase our taxes, along with a severance, so they don't have to deal with the teachers and government workers.
My income taxes will be raised to "fix" the problem.
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Post by timberdoodle on May 17, 2015 11:38:00 GMT -5
If yours are going up so are mine... matter of fact I pay State tax on what I pay the Feds in tax...now that's a real bargain.. forecast-chart.com/chart-natural-gas.html you can see how all the severance taxes have affected the price of natural gas over ten years graph ends around 2014.. gas is currently around $3. Been in the $2's for most of the year. Anyone who believes that Pa enacting a severance tax or not will make any difference to the market prices is not dealing with the reality of the market.
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Post by Deleted on May 17, 2015 12:21:14 GMT -5
If yours are going up so are mine... matter of fact I pay State tax on what I pay the Feds in tax...now that's a real bargain.. forecast-chart.com/chart-natural-gas.html you can see how all the severance taxes have affected the price of natural gas over ten years graph ends around 2014.. gas is currently around $3. Been in the $2's for most of the year. Anyone who believes that Pa enacting a severance tax or not will make any difference to the market prices is not dealing with the reality of the market. There is NOTHING in that chart, that I can see, to link severance gas taxes to price fluctuations. Would you please explain how you reached that conclusion?
What that chart does show is a long, sustained drop in NG prices. Obviously, the severance taxes in all the other energy producing states are killing the price of NG on the market! LOL!
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Post by Dutch on May 17, 2015 12:34:20 GMT -5
Supply and demand determine price.
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Post by timberdoodle on May 17, 2015 12:39:33 GMT -5
I didn't reach that conclusion..
YOU DID!
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Post by davet on May 17, 2015 12:59:46 GMT -5
Anyone who believes that Pa enacting a severance tax or not will make any difference to the market prices is not dealing with the reality of the market. This statement is a true joke of a comment. Do you have an independent....ie: non industry related sources of information that actually backs this up? I'm thinking that if Pa. imposes this tax, it's similar to taking a whizz in the ocean. Water is going in....but the level isn't changing.
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Post by dennyf on May 17, 2015 13:28:12 GMT -5
Mentioned on the news the other night, that UGI is lowering their prices to customers again. Apparently a reflection on supply still causing NG to be available at lower market prices?
So if market prices are at a low ebb due to a "glut" on the supply side and more taxes are proprosed on drillers, who expects any movment in new wells?
Despite that, I still see notices of new well permits being issued/wells being started, in Tioga and Lycoming counties.
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Post by Deleted on May 17, 2015 13:28:32 GMT -5
timber, You said, in the post citing the chart, which shows a steady and long-term decline in NG prices, "Anyone who believes that Pa enacting a severance tax or not will make any difference to the market prices is not dealing with the reality of the market." I asked you to tie together the chart and severance taxes. You didn't, or couldn't, do that. What the chart does show is the average price of NG dropping from $10.00 in the 2004-2006 time period to $3.00 in the 2012-2014 time period. PA is responsible for about 15-20% of our nations NG production. Are you going to tell me that 15-20% of the United State's NG production not having a severance tax imposed on it is responsible for the drop of the NG price 70% in eight years? If so, let's get the other states to drop their severance taxes and NG can be almost free! LOL My point is that , yes, the severance taxes imposed in every state other than PA is built into the market price and despite that fact the price of NG steadily declines. If PA's 15-20% of national production is subjected to an extraction tax I expect the market price to be affected little, if at all. Nice try at ignoring direct questions and snipping things out of context though!
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Post by Deleted on May 17, 2015 14:21:16 GMT -5
Mentioned on the news the other night, that UGI is lowering their prices to customers again. Apparently a reflection on supply still causing NG to be available at lower market prices? So if market prices are at a low ebb due to a "glut" on the supply side and more taxes are proprosed on drillers, who expects any movment in new wells? Despite that, I still see notices of new well permits being issued/wells being started, in Tioga and Lycoming counties. Yep denny, Supply and demand drive the market. The good news, from my point of view as an investor in energy, is that the gas not being extracted now will be sold later, when demand solidifies, at a higher price, the status of a PA severance tax non-withstanding! That's why the good energy companies, those who did not over-leverage themselves, are still drilling wells. It's much cheaper to drill them right now as the demand on the drilling side of the industry is low. In stocks it's buy low and sell high. In energy it's drill cheap and supply high!
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Post by timberdoodle on May 17, 2015 15:06:38 GMT -5
Dave& Blue What that statement says is exactly what you are both now saying that the tax will make no difference to market pricing. Anyone who believes that it will is not dealing with the reality of the market. I can't type it any slower than that. LOL.
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Post by timberdoodle on May 17, 2015 15:13:06 GMT -5
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Post by Dutch on May 17, 2015 15:47:46 GMT -5
Mentioned on the news the other night, that UGI is lowering their prices to customers again. Apparently a reflection on supply still causing NG to be available at lower market prices? So if market prices are at a low ebb due to a "glut" on the supply side and more taxes are proprosed on drillers, who expects any movment in new wells? Despite that, I still see notices of new well permits being issued/wells being started, in Tioga and Lycoming counties. Yep denny, Supply and demand drive the market. The good news, from my point of view as an investor in energy, is that the gas not being extracted now will be sold later, when demand solidifies, at a higher price, the status of a PA severance tax non-withstanding! That's why the good energy companies, those who did not over-leverage themselves, are still drilling wells. It's much cheaper to drill them right now as the demand on the drilling side of the industry is low. In stocks it's buy low and sell high. In energy it's drill cheap and supply high!
Correct. Companies are still drilling, although MUCH more slowly, they just aren't fracking wells, be it gas or oil. Right now, drill rig rentals are getting cheaper, and associated costs. Supply and demand, again.
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Post by Dutch on May 17, 2015 15:49:22 GMT -5
Mentioned on the news the other night, that UGI is lowering their prices to customers again. Apparently a reflection on supply still causing NG to be available at lower market prices? So if market prices are at a low ebb due to a "glut" on the supply side and more taxes are proprosed on drillers, who expects any movment in new wells?
Despite that, I still see notices of new well permits being issued/wells being started, in Tioga and Lycoming counties. When the price of gas goes up, new wells will be drilled, and fracked, and new supply will come online.
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Post by Deleted on May 17, 2015 16:12:36 GMT -5
Dave& Blue What that statement says is exactly what you are both now saying that the tax will make no difference to market pricing. Anyone who believes that it will is not dealing with the reality of the market. I can't type it any slower than that. LOL. timber, Got ya there. Can I count you in when it comes to supporting a PA extraction tax?
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Post by timberdoodle on May 17, 2015 16:18:14 GMT -5
no my friend you can't.
now...explain this.
That tax, as a cost of production, has a direct impact on the market price of petroleum products
Your statement.
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Post by Deleted on May 17, 2015 16:55:41 GMT -5
Yes it does, it's factored into the market price of NG as a cost of production. I never said otherwise. Despite it being implemented on 80-85% of the natural gas produced in the USA the costs of natural gas have steadily fallen as your chart shows.
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Post by dennyf on May 17, 2015 17:14:46 GMT -5
Gee, thanks for all the explanations on things. smileys-whistling-823718
My point was that despite claims I've seen, that no wells are being drilled now due to various market conditions/imposition of a severance tax/etc - some wells actually are being drilled.
Since leases/permits usually contain restrictions about such as "must be started within so many months, etc", one might consider such things to also be in play? Regardless of why, it is happening. Not on the scale of a few years ago, but goes on.
The gas isn't going anywhere, so the only considerations are market prices; equipment/manpower availability; lease and permit requirements and so on.
And still the fact remains that additional pipelines need be installed before much of anyone makes a dime from a gas well.
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