NOTE: THIS STORY HAS BEEN CORRECTED.
ONE OF THE big questions this fall on the state's legislative agenda is how much of a tax will be imposed on companies extracting gas from the Marcellus Shale formation.
The legislature failed to impose a tax last year, but did authorize a tax. The amount of the tax will be determined in the fall.
It's worth asking why such a tax failed - at a time when the state was facing a $3.2 billion budget shortfall, and when every other state with gas drilling imposes an extraction tax - especially since the answer will likely have a big impact on this year's debate over how much to tax.
Opponents of the tax say that they were hesitant to impose a tax on a fledgling industry before it got established in the state.
That's one argument. Another is that the natural gas industry poured so much money into lawmakers' campaign accounts that it was able to buy favorable legislation from state lawmakers. It did this out of the public eye, yet perfectly legally. And thanks to loopholes in the law, it's likely to do it again.
"This fall, there's a 18-day period from Sept. 13th to Oct. 1 when lawmakers will be able to rake in cash from the gas industry and not have to report it until after their tax votes are cast."
Last year, natural-gas companies dumped thousands of dollars into the campaign coffers of state politicians. We know about the donations now, but most of them were hidden from public view until after the tax debate had ended.
Here's how: On May 26, 2009, lawmakers introduced a bill that included an extraction tax. While the bill bounced back and forth between the House and Senate for four months, natural-gas drillers donated a whopping $191,042 to candidates, lawmakers, and political action committees, according to an analysis by Pennsylvania Common Cause. By the end of the process on Oct. 9, the part of the bill that would have taxed natural gas extraction was gone from the legislation.
If lumped together, the amount donated by gas companies during this period alone would make the industry the fourth-largest single contributor in the state, behind only the Pennsylvania Republican Party ($1,987,099), Philadelphia Trial Lawyers Association ($1,595,000) and International Brotherhood of Electrical Workers Local 98 ($212,500). (Environmental groups gave, too, in opposition, but totals aren't available.)
The natural-gas companies were very careful to target their donations to lawmakers with influence over the budget. In fact, the biggest recipients of donations during that period were leaders of the Republican or Democratic caucuses, as well as members of the powerful Appropriations Committee and various environmental committees.
For example, Sen. Joseph Scarnati (R-25) got $20,750 in contributions during the four-month period when the tax was being considered by the legislature. Scarnati is president pro tempore of the State Senate, with a great deal of power over what legislation gets considered by the legislature.
Sen. Jake Corman (R-34), received $11,650 while the bill was being considered by the legislature. Corman is the chairman of the Senate Appropriations Committee, which makes him incredibly powerful on issues related to taxes. The severance tax was stripped from the original legislation while in front of his committee. (See chart below for more.)
The thinking behind such donations is that an industry can give money to elected officials while they're debating legislation, but if the process is transparent, the public can decide if there's a problem. In this case, though, loopholes in campaign finance rules shielded the donations from public view.
That's because the Pennsylvania Department of State requires candidates to submit campaign finance reports on a schedule based around elections, especially primaries in May and the general in November, but not the legislative calendar. So special interests can make big donations while lawmakers are in the middle of debating legislation. In 2009, there was a two-month period when they were considering tax-related legislation, getting donations from drillers, and not sharing that information with the public.
And the same loophole will come into play this year.
THE DETAILS and amount of the gas tax must be worked out by Oct. 1. This year's campaign finance reporting period goes from May 17 to Sept. 8, with the final report due on Sept. 21.
That means the public won't see most of the donations made while lawmakers are debating the specifics of the tax until a date very close to the voting deadline. Second, there will be a 18-day period - from Sept. 13 to Oct. 1 - when lawmakers will be able to rake in cash that they won't have to report until after their votes are cast.
Eventually, the donations will be made public. But that won't be until after the tax - and whatever exemptions, discounts or low rates the industry can get for its money - has been established.
Ben Waxman reports for It's Our Money.