Proposed legislation would allow municipalities to assess a
property tax on minerals such as oil and natural gas.

Introduced by state House Majority Leader Bill DeWeese,
D-Waynesburg, the legislation would allow local counties,
municipalities and school districts to recoup some funding from
drilling for the minerals, which could be used to prevent future
property tax increases.

The issue goes hand-in-hand with a proposal by the Rendell
administration, which wants to apply a gross profits tax to oil
companies. The plan could eventually trickle down to local
independent oil and gas producers.

Both plans could potentially cause significant harm to a
burgeoning oil and natural gas industry across northcentral
Pennsylvania, which has rebounded after years of negative
returns.

“Gas operators have been drilling natural gas and methane gas
wells throughout the western part of the commonwealth with an
unrestrained abandon and they do so virtually tax free,” DeWeese
told the Washington (Pa.) Observer-Reporter newspaper. He added
operators are also damaging roads and property.

Officials said oil and natural gas were taxed as properties
until 2002. That December, the state Supreme Court ruled the
minerals could not be taxed as real estate as part of a case
involving the Independent Oil and Gas Association of Pennsylvania
versus the Board of Assessment Appeals of Fayette County.

The court ruled the assessment law failed to explicitly
recognize oil and gas as being taxable.

“We thought the whole issue was resolved in court …,”
Pennsylvania Oil and Gas Association Executive Director Steve
Rhoads said Monday. “This is an attempt to reinstate the authority
to tax those minerals.”

While Rhoads said he hasn’t seen a copy of DeWeese’s proposed
legislation – which DeWeese is currently seeking co-sponsors for –
the municipalities wouldn’t gain much monetarily from taxing
minerals.

“This is much to do about not very much money,” Rhoads said,
adding the organization looked into the history of property tax
assessment throughout the oil and gas producing regions when the
legislation was originally introduced. “It really is a low
revenue-generator for the municipalities.”

Rhoads said the county involved in the previous litigation lies
in DeWeese’s legislative district, which could be a reason he is
introducing the legislation again.

“It’s pretty ironic that DeWeese wants to lower property tax
burdens on the one hand, but has no problem turning right around
and imposing the tax on us (industry) after the court gave us
relief,” Rhoads said.

DeWeese estimates the assessed value of the oil and gas across
the state is between $10 billion and $20 billion.

Locally, Fred Fesenmyer, president and chief executive officer
of Minard Run Oil Co., said he’s not in favor of such
legislation.

“I think there are better ways for municipalities to achieve
these things without having to go to the industry,” Fesenmyer said,
adding he also hasn’t seen a final version of the bill. “Being in
the oil business requires a great deal of capital. For people to
say we are making money hand over fist, while it might appear that
way, it also takes a lot of money to do it.”

In response to DeWeese’s assertion that operators are damaging
roads and property, Fesenmyer said it’s quite the contrary.

“We are being regulated daily,” Fesenmyer said, “and I think we
are much better custodians of the land than we used to be. We try
to use only that much of the surface that’s necessary to do our
drilling and production.”

State Rep. Martin Causer, R-Turtlepoint, hadn’t seen a copy of
DeWeese’s proposal, and declined to comment until he knew the
working parts of the bill.

DeWeese said he would be introducing the legislation within the
next couple of weeks.