The Democratic governor issued a news release that blamed legislative Republicans for what he described as a refusal to negotiate in good faith.
"Their clear unwillingness to change their previous proposal or to resolve differences with the House Democrats and with my administration makes it obvious that they have killed the severance tax in this legislative session," Rendell said.
He said the failure to enact a tax on drilling in the Marcellus Shale formation will harm the environment, make it harder for local governments to deal with the impact of drilling and cause the state government financial problems.
Pennsylvania is the only state with significant natural gas production that does not tax it.
The governor had tried to jump-start talks this week by seeking written counterproposals from House and Senate leaders of both parties. He said the response by Republican leaders did not produce a reasonable compromise on the tax rate, one of many aspects of the idea that has been disputed.
House Republican spokesman Steve Miskin said his caucus had offered a viable proposal, consistently advocated by Minority Leader Sam Smith, R-Jefferson.
"Rep. Smith never once strayed from our position in any conversation or any meeting with Gov. Rendell, not once," Miskin said. "For him to say we haven't bargained in good faith, that's absolutely false."
Erik Arneson, spokesman for the Senate Republicans, said Rendell's announcement was unexpected, and leaders were preparing a response.
Rendell said GOP leaders of both chambers in the General Assembly "clearly desire to put costs of natural gas drilling on the backs of Pennsylvania taxpayers, rather than on the large multinational oil and gas corporations who stand to reap enormous wealth from our state's resources."
Rendell's pronouncement means the topic almost certainly will not be addressed before next year, when a new governor takes office. The Republican candidate, Attorney General Tom Corbett, opposes a Marcellus Shale tax and all other new or increased taxes. The Democratic candidate, Allegheny County executive Dan Onorato, has said he favors a gas-drilling tax and would earmark its revenues for environmental protection.
Drilling crews have been flocking since late 2008 to the Marcellus Shale, a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio, with money from companies around the world financing the exploration. Geologists say it could become the nation's most productive natural gas field, capable of supplying the entire country's needs for up to two decades by some estimates.