A recession weary state has had to cut expenses, programs and tap its reserves, but in the end, it did not tap the natural gas development of the Marcellus shale being developed.
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Even though all through the budget negotiations, Gov. Rendell spoke of pain, when it came down to it, on Oct. 9, when the final bill was signed into law, one industry came away, "pain free."
There were proposals considered to tax the rich black-rock resevoir of natural gas reserves, known as Marcellus Shale, but industry leaders and lobbyists were albe to counter the desire by some to balance the budget with a tax.
As well, the industry persuaded the Gov. and Legislature to lease more public land to gas drillers - at the same time as it cut environmental protection.
What happened to Gov. Rendell's natural gas-tax proposal?
He has beenn quoted widely that he did not want to "kill the golden goose" and that the industry made good arguments for letting it develop before determining how to tax it.
Other legislators came away with a more cynical view.
What follows is a closer look at some key moments in the short life of Rendell's proposal to help balance the budget by taxing natural gas.
At Gov. Rendell's Feb. 4 budget address, the rush was on. Industry representatives were racing across the state, securing leases and making plans to drill wells at twice last year's pace.
Rendell, got to work and checked with Gov. Joe Manchin III of West Virginia, a state that also sits atop the Marcellus Shale and has taxed natural gas.
In his budget address, Rendell proposed to tax gas extracted in the state.
Manchin, a Democrat as well, indicated to him that West Virginia's tax did not "inhibit gas extraction and that it is continuing at a record pace, and it's reaping critically needed revenues so the state can provide services to its citizens."
Rendell's plan matched West Virginia's - a 5 percent tax on the value of natural gas at the wellhead, plus 4.7 cents per 1,000 cubic feet of natural gas extracted.
The Gov. estimates, this tax could raise $107 million for Pennsylvania in its first year, helping fill the huge budget gap the State was facing.
In a recent interview, Manchin described what he said to Rendell months ago.
"The Marcellus Shale is a tremendous producer. A severance tax will not deter" the drillers, Manchin said. "Believe me, if we didn't have the gas, they wouldn't be here."
Manchin said he had faced industry complaints in 2005 when he proposed to expand the tax, with some companies threatening to leave.
He offered to have the state buy up their leases "so you don't lose one penny." No one took him up on his offer.
By spring of 2009, Rendell's tax proposal was the talk of the industry. In a June 1 panel discussion held by a New York investment firm, four executives spoke of what might happen next in Pennsylvania.
They talked of the Marcellus "play" - industry parlance for a focused campaign to expand drilling. Rich Weber, president and chief operating officer of Atlas Energy Resources of Pittsburgh, down-played Rendell's tax proposal.
"I think the shot over the bow from the governor was just that. He wanted to spark discussion," Weber said, according to a published transcript. "I think the legislature is going to kill it for this year. It may be inevitable down the road but who knows."
Jim Fraser, senior vice president of Talisman Energy Inc. in Calgary, Alberta, did some math. "We have encouraged the state to lease some more of that land," he said, adding that his "back of an envelope" figures showed the state could raise more money by leasing land to drillers than by taxing the gas.
Chad Stephens, senior vice president of Range Resources Corp. of Texas, weighed the pros and cons.
"Maybe at some point in the far-out future if they introduce a severance tax, once the play gets some legs, that's a different story," he said. "But if they do implement the tax, at least the government will have some skin in the game." State officials might become "more cooperative and try to help the play along."
Murry S. Gerber, chairman and chief executive officer of EQT Corp., spoke next.
"Chad said it right. Skin in the game," Gerber said. "The local governments need to get some of this money back. I mean, we are on their roads."
How this is going to play our for local governments facecd with road repairs and stretched services, has yet to be determined. The State it seems has different priorities than the local communities.
Four days later, Gerber sat with his aides and state officials in his company's sixth-floor conference room in Pittsburgh. His guests included Gov. Rendell. Gerber has donated $30,000 to Rendell's reelection fund and last October Rendell traveled to Pittsburgh with a gift of his own- $2.8 million in state grants and tax credits for Gerber's company that would create 350 jobs.
In the June 5 meeting, Gerber did most of the talking. Rendell asked questions. "You could see the governor turning a little bit" to Gerber's pitch, West said last week.
Rendell agreed to create a task force of stakeholders - legislators, environmental officials, industry executives - to examine Marcellus Shale issues as a result of the meeting.
As the summer rolled on and the budget impasse continued, the industry spent than $1 million to lobby legislators in the first half of the year alone, reports from the State indicated.
Foes of the gas tax began citing a Pennsylvania State University study, "An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play."
The study said the tax would backfire.
The drilling for Marcellus Shale in Pennsylvania was in "the takeoff phase," the study said. It concluded that a severance tax would inhibit drilling and thus slow job growth and revenue to the State and local municipalities.
With no tax, the study said, the Marcellus reserve could become a bonanza for the state "if pro-growth policies are pursued that unleash the entrepreneurial spirit."
The study's primary author, Robert Watson, an emeritus processor of petroleum and natural gas engineering indicated that the shale contains enough gas to make Pennsylvania "an OPEC nation."
The Marcellus Shale Committee, a group of more than 50 natural-gas and drilling companies, commissioned the study and paid Penn State about $100,000 for it, he said.
Lashing, the state's environmental community called the study a tool of a deep-pocketed industry. Even the state's top conservation official questioned its findings.
In August, at an industry conference, the acting secretary of conservation and natural resources, John Quigley, rose to introduce Watson. Quigley also told the audience - a citizens' advisory panel on environmental policy - that Watson's study was unsubstantiated by facts. That prompted Watson to stand up and yelled, twice, "That's bull-."
Quigley remembers the meeting. "I pointed out that the study was paid for by the industry, and that any suggestion that a severance tax would strangle the infant industry in its crib strains credulity," he said Friday.
Watson stands by his findings. "The procedure we used was scientific," he said. "We would have come up with the same answers regardless of who paid for it."
In August, there was no change in Rendell's public stance. He wanted the tax.
But by Aug. 31, in a briefing to reporters, the governor said, "It won't be in the mix this year."
Rendell said industry executives had convinced him that imposing a tax now would stunt drilling. Also, he said a drop in the price of natural gas made the tax impractical. And Senate Republicans were so opposed to the tax that it would not pass.
It would have to wait until next year, Rendell said.
"We felt we should let the industry get off to a good start," he said, "and that surpasses our need for money."
His change of position was news to many - including Steve Crawford, Rendell's chief of staff. "The governor's press conferences are always newsworthy," Crawford said last week, "and sometimes they are even newsworthy to those of us closest to him."
His switch also surprised other Democratic leaders in the legislature, who made a last-ditch effort to revive the tax before the budget was signed.
The tax fight is over for now. But the industry is still stockpiling resources for future contact with Pennsylvania officeholders.
Range Resources, the Texas driller, recently hired away a top Rendell aide to be its vice president for government relations and regulatory affairs. K. Scott Roy had been Rendell's executive deputy chief of staff and his liaison to the natural-gas industry and environmental groups.
Range Resources also hosted a luncheon this month near Pittsburgh for legislators from both parties.
Among those at the lunch was State Rep. Timothy J. Solobay (D., Washington), an unabashed natural-gas cheerleader. He's seen drillers transform his district. Steamfitters and welders are getting work. Job-training and truck-driving classes are full.
Natural gas "is the new steel," said Solobay. "They all told me is that severance [tax] is coming," he said of industry executives. "They are only asking for a couple of years to get the infrastructure in place."
State Sen. Jake Corman (R., Centre) has seen drill rigs rising in his district, too. Eventually, Corman said, a tax could help towns defray the related costs. "I think a day will come when there's a severance tax," he said. "I just didn't think that day was today."
Others disagree. "This was the best time to do it," State Rep. David K. Levdansky (D., Allegheny) said of the tax. Next year, he said, "the industry will just dig in their heels even harder in hopes that a Republican governor more sympathetic to their cause wins election."
In June, Range Resources launched a political action committee in Pennsylvania. Nine executives put in a total of $49,500. The PAC's first donation, for $5,000, went to a Republican campaign fund begun by state Attorney General Tom Corbett.
He's running for governor next year.
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