Marcellus Shale

News Flash! Marcellus Shale Coalition Takes on PA Charities

By Stephen Herzenberg, Third and State

Thanks to Citizens United, we are all the beneficiaries of unlimited corporate money in our elections — witness the onslaught of TV ads interrupting our ballgames and the fall lineup of TV shows.

In a new twist, the very groups that agitated to spend unlimited funds to promote their point of view are now critical of others who challenge them. What brings this to mind is an Associated Press story this morning that the Marcellus Shale Coalition is not happy about the funding priorities of the Heinz Endowments and William Penn Foundation.

Citizens groups and nonprofits around the nation are asking questions about environmental and health impacts of natural gas hydraulic fracturing, or fracking, and Pennsylvania charities are funding much of the debate.

Foundations from Philadelphia to Pittsburgh have provided more than $19 million for gas-drilling-related grants since 2009, according to an Associated Press review of charity data. The money has paid for scientific studies, films, radio programs, websites and even trout fishing groups that monitor water quality.

That’s led to expressions of gratitude from those who say state and federal governments aren’t doing enough on the issue but also protests from some in the gas-drilling industry, who claim there’s bias in the campaigns...

But the Marcellus Shale Coalition, a leading industry group, criticized what it sees as a “record of bankrolling organizations and institutions opposed to the safe development of job-creating American natural gas.”

(Full disclosure: the Keystone Research Center receives funding from the William Penn Foundation and Heinz Endowments.)

What the groups, and their funders, are critical of is the unsafe development of natural gas. Since Pennsylvania’s official Marcellus policy is drill baby drill, somebody has to do the due diligence, so thank your local charity.

A related story provides heartening news that public debate can smoke out research that is simply advancing the perspective of the group that paid for the study.

A natural-gas driller’s group has canceled a Pennsylvania State University study of hydraulic fracturing after some faculty members balked at the project that had drawn criticism for being slanted toward industry.

The Marcellus Shale Coalition, which paid more than $146,000 for three previous studies, ended this year’s report after work had started, said Kathryn Klaber, coalition president.

The earlier studies were co-written by former Penn State professor Tim Considine, an economist now at the University of Wyoming who has produced research on economic and energy issues under contract to trade associations. The first study, in 2009, initially failed to disclose its industry funding and was used by lawmakers to kill a state tax on gas drillers. It was characterized as advocacy for producers by groups such as the nonprofit Pennsylvania Budget and Policy Center in Harrisburg...

The Marcellus Shale Coalition, a Pittsburgh-based drillers group, paid Penn State for the three economic-impact studies beginning in 2009, according to John Hanold, senior associate director of Penn State’s Office of Sponsored Programs...

Subsequent studies by other researchers have found that gas drilling created fewer than half the jobs projected by Considine in 2009.

The public needs reliable data to understand what drilling does and what it doesn’t do — information that the industry just won’t provide. Rational, independent studies funded by an unbiased government or private foundations, are in this post-Citizens United environment the antidote to unlimited, year-round campaign commercials, like the ones offered by our friends in the gas industry.

Fact Checking the Corbett Jobs Record...and Some Unsolicited Advice

By Stephen Herzenberg, Third and State

The Corbett administration has a new summary of Pennsylvania's recent job performance. Today's news that Pennsylvania's unemployment rate is as high as the national unemployment rate underscores, however, that the state's recent jobs record is not  good. Let’s take a closer look.

PA vs. U.S.: The Corbett jobs summary notes that Pennsylvania's unemployment rate is below the national rate — and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (See Table A.) But the gap between the two rates — the "Pennsylvania advantage" — has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.

Private-sector Job Growth: While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story. 

The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania's rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania's private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.

These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy. 

Manufacturing Job Growth: Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania's manufacturing job growth since early 2010 is slightly below half the national increase. (See The State of Working Pennsylvania 2012.) 

New Hires in Marcellus Shale: Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As we've explained repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is. 

The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.

Here's the unsolicited advice: Twenty months into Governor Corbett's first term, there is still time for the Governor to pursue policies that will improve Pennsylvania's job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor's own transportation commission. 

In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.

Will Senator Williams recuse himself from Marcellus related votes?

Fun fact, everyone, I don't work for any non-profit at all any more. I am no longer a professional Organizer. My career in that vein has ended. That's not to say that I don't still care a ton about the issues. Especially the issue of the environment. Ironically, in fact, I found I did the worst job on the issue I cared the most about. Strange, but that's a post for another time.

The reason I am writing today is because I wanted to put an exchange I had with Senator Anthony Williams of West Philadelphia onto the record. First, because it should be instructive for other politicians on how not to use Twitter, and also because it raises an important public policy question: should politicians recuse themselves from voting on issues that their households have a vested interest in?

It started with this story in The Inquirer. From the short piece:

The Marcellus Shale Coalition, the natural gas industry trade group, is expanding its presence in Southeastern Pennsylvania by hiring Shari Williams, a former communications specialist at the Pennsylvania Public Utility Commission and the wife of State Sen. Anthony H. Williams (D., Philadelphia).

If you're not familiar, The Marcellus Shale Coalition is a lobbying group that would have you believe that natural gas drilling is so clean and pure that loading the ground full of hydrochloric acid actually improves soil quality. Like... potatoes come out with vitamin C and manganese after one of their shale rigs gets done with a site.

Notably, Sen. Williams was one of two noteworthy Senate D's to cast the wrong vote on the only significant piece of legislation that has passed on the Marcellus Shale so far. Now known as Act 13.

So then when the news came out that his wife is now working for Team Pollution, my hackles were raised. It's not hard to imagine that the Senator had some idea that this relationship might be consummated even as the vote was going down. Shady. Or maybe he didn't. There had to be some reason why he and Hughes backed this legislation when every other Democrat stood against it, though. The crummiest part is that I don't think they even needed their votes to get it passed.

So I sent him the following tweet last Friday:

For the full exchange that followed, hit read more.

Pennsylvania's Natural Gas Tax Giveaway Exceeds $500 Million Mark

By Michael Wood, Third and State

The state's Department of Environmental Production (DEP) recently published a biannual report on Marcellus Shale production in Pennsylvania. (Most states require monthly reporting, but that is a different story.) In the data, we can now see how much the state has really given away by refusing to put a robust gas extraction tax in place — and the sum is staggering.

From July 2009 to June 2012, over $8 billion worth of natural gas was extracted from Pennsylvania’s share of the Marcellus Shale. The Commonwealth would have collected more than $500 million had we had West Virginia's natural gas tax in place. Instead, we got $0.

The recent DEP report was incomplete, as the Associated Press highlighted. Production from Chesapeake Energy (likely the state's largest gas producer) wasn't included nor disclosed as being missing in the initial release. Add in the production from Chesapeake over the last six months, and the lost tax revenue figure would be even bigger.

You may remember the Pennsylvania Budget and Policy Center's "drilling tax ticker," which tallied up the lost revenue to the state from not having a meaningful drilling tax in place. Those figures were based on conservative estimates of per-well Marcellus Shale production. We now have real production data (well, all drillers but Chesapeake) to analyze — giving us more accurate estimates.

Gas producers will pay an annual drilling impact fee beginning September 1, 2012, but the proceeds from the fee are expected to be lower than a modest drilling tax would bring in — even at today's low natural gas prices.
Click to enlarge

How could this foregone $500 million over the last three years been used?

  • Rehire 3,000 teachers;
  • Save General Assistance for 68,000 needy Pennsylvanians;
  • Restore funding for parks and environmental protection; or
  • Help the state meet growing pension obligations.

Pennsylvania continues to lose out on this one-time resource and may possibly be turning our natural bounty into a resource curse. These new data give us an idea of how much we are giving away.

High CEO Pay Comes Under Fire from Shareholders

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being "historic" for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. ...

"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book "Exile on Wall Street."

"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up."

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT's annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production. 

Pa. Marcellus Shale Fee Among the Lowest in the Nation

A blog post by Michael Wood, originally published at Third and State.

Lost amidst our work this week on Governor Corbett's 2012-13 budget was the state Legislature's passage of a Marcellus Shale package that will give Pennsylvania one of the lowest drilling tax or fee rates in the nation. The bill is now awaiting the Governor's signatures.

As The New York Times wrote this week:

Critics, among them some municipalities and environmental groups, said the bill was a capitulation to the energy industry and would all but eliminate their ability to decide where gas development could happen. The measure would limit it in densely populated urban areas but not in suburban spaces, critics said. They also said the environmental and safety standards, like the requirement that wells be at least 500 feet from any house, were weak.

The Times also cited our estimates that "at the current price of natural gas, the fee would amount to an effective tax rate of 2.6 percent, far less than the 5.4 percent in Texas."

The fee sets a 15-year rate schedule for Marcellus wells that rises and falls based on the price of natural gas and inflation. The Associated Press made the point, again citing our work, that this is much lower than drillers pay in other states:

Will Michael Nutter Be the Deciding Vote on the Shale Bill?

Update: The Pennsylvania Senate approved the shale fee bill Tuesday by a vote of 31-19. The House followed suit Wednesday, approving it by a narrow vote of 101-90.

Will Philadelphia Mayor Michael Nutter be the deciding vote on a bad Marcellus Shale bill?

In typical fashion, the Pennsylvania Legislature is ramming through a shale bill, including a natural gas drilling fee, at the very last minute that is worse than anything we have seen so far.

Rumors are that the Mayor is pressuring Philadelphia Senators to take the deal, which is bad for all Pennsylvanians and not so hot for Philly.

There has been tremendous pressure on Southeastern Senators to hold out for a tax that is more than a pittance, and to restore to local governments the constitutional right to protect their communities from the excesses of drillers gone wild.

The Democratic leadership team of Jay Costa and Vince Hughes have breathed life into a Democratic Caucus that has existed pretty much to collect their paychecks. They have done a fabulous job pushing for strong environmental protection against a legion of gas lobbyists, while the Governor's inclination is to give the drillers the keys to the state and walk away. Philadelphia Senators Vince Hughes and Tony Williams are the most likely to take the bait.

We need a round two on the shale bill. Our Senators, and the Mayor, should hold out for a better deal.

One Year and Still Going Strong

Third and State celebrated its one-year anniversary this week. We launched on February 1, 2011, and 350 posts later we're still going strong.

We couldn't do it without our readers, so we thought it would be fun to take a look back at what posts you liked the most. And so we bring you a countdown of the top 10 most viewed blog posts at Third and State.

10. Governor Corbett Unveils 2011-12 Budget Proposal, March 9, 2011:

By taking direct aim at schools and higher education, the Governor’s plan disregards a fundamental principle of economic growth — businesses locate and expand in states with an educated workforce and academic centers of innovation.

There is a better choice. Lawmakers can choose to take a more balanced approach that makes targeted cuts, improves accountability and raises revenue.

9. 2011-12 State Budget Highlights, June 28, 2011:

State legislative leaders and Governor Tom Corbett agreed on a 2011-12 state budget deal this week, and on Tuesday, the state Senate approved it on a 30-20 party-line vote. The bill heads to the House of Representatives next. ...

The biggest cuts, in both dollars and percentages, are in education programs, including PreK-12 and higher education.

8. Marcellus Shale, Unemployment and Industrial Diversity, August 3, 2011:

Pa. Loses $300 Million to Gas Drilling Tax Impasse

Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center.

Our Drilling Tax Ticker tracks the revenue Pennsylvania has lost since October 1, 2009 by not having a tax in place. It shot past $300 million Monday morning.

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

Plus, the $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years.

Must Reads: Where Is the Shared Sacrifice?

A blog post by Mark Price, originally published at Third and State.

When the economy is as weak as it is today, the prudent approach to the state budget is a balanced approach that looks to cut spending and raise additional revenue. A Patriot-News editorial this morning points out that nonprofit groups providing services to victims of domestic violence and rape, as well as people with severe health problems, have been particularly hard hit by the last several years of budget cutting.

The last couple of years, especially 2011, have been tough ones because of state funding cuts, and this year might not be much better. As lawmakers and the governor look at another difficult budget — introduced in February — they need to think hard about what further reductions in funding to charitable groups will mean in communities across the state...

Some of the testimonials in the latest survey [by the United Way] show the grim reality for many people seeking help:

A shelter director said, “For the second year in a row, our shelter has turned away more battered women and their children than we were able to house, due to lack of beds.”

“We are unable to provide health center services as we were before. A nurse is only at the center 16 hours per week vs. 40 hours,” one service stated.

“We’ve had to tell people wanting to get their GED that they had to seek services elsewhere,” a provider said.

“Ms. Smith has ALS and needs a device to be able to communicate in her last days. However, she is on a waiting list to borrow the equipment she needs,” added another.

No PA Marcellus Shale Fee for 2011

A blog post by Michael Wood, originally published at Third and State.

Another year has nearly come and go, and still Pennsylvania has no Marcellus Shale drilling tax or fee.

To refresh your memory, the state House and Senate seem to be engaged in a game of how low can you go with their competing shale plans.

Last month, the House approved HB 1950, taking Governor Tom Corbett’s approach to a drilling impact fee. It would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate.

The Senate, meanwhile, adopted SB 1100, sponsored by Senator Joseph Scarnati, raising $360,000 over the life of an average well, the equivalent of 2.2%.

A comparable well in Texas would raise $878,500 — five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100. Even an industry-supported drilling tax proposal from August 2010 would collect more than these plans.

Under both the House and Senate bills, drillers will pay less in Pennsylvania than they do in Arkansas, Texas, Wyoming and many other energy-rich states.

Now fast forward to this week. On Wednesday, the Senate amended the Scarnati plan into HB 1950 and sent it back to the House before adjourning for the rest of 2011.

Why kick the ball back to the House? StateImpactPA explains:

A $56 million 'Oops': PA Revenue Department Updates Marcellus Shale Tax Estimates

A blog post by Michael Wood, originally published at Third and State.

Tim Puko at the Pittsburgh Tribune-Review uncovered a $56 million mistake in the Pennsylvania Department of Revenue's reporting of personal income tax (PIT) collections attributed to Marcellus Shale drilling for last year.

Back in May, the Department estimated that taxable Marcellus Shale royalties generated $102.7 million in PIT collections in 2010. Now the Department says that figure is a tad lower — $46.2 million, a decrease of $56.5 million or over 55% from what was reported six months ago. To quote Britney Spears, "Oops!"

How does this happen? By rushing too fast and using incomplete data to make a policy point, as I noted in the Tribune-Review story. This type of cheerleading report for a single industry is highly unusual for the Department of Revenue. There isn't a report of taxes paid by snack food manufacturers, steel producers, or even dairy farms.

The updated Marcellus tax data included another interesting tidbit — how little is paid in PIT from income flowing through to oil and gas company owners. In 2009, the Department reports $9.9 million in PIT from these taxpayers.

It Is an Undeniable Fact that I Am an Uber Responsible Private-Sector Labor Market Analysis Machine

A blog post by Mark Price, originally published at Third and State.

A while back the Pennsylvania Department of Labor and Industry released a new version of its Marcellus Shale Fast Facts, which prompted a statement from Kathryn Klaber of the Marcellus Shale Coalition (MSC):

This new data further reinforces the undeniable fact that responsible American natural gas production is an unmatched private sector job creation machine.

So let's take a look at what the numbers say. Figure 1 presents on the left axis total employment in the Marcellus core industries by quarter from the fourth quarter of 2007 to first quarter of 2011 (the most recent data available).

On the right axis, the percent change from the previous quarter in total employment in that sector (the red line).

On a quarterly basis, employment growth in this sector is volatile, ranging from negative 5% in the first quarter of 2009 to an increase of more than 20% in the second quarter of 2010.

Between the first quarter of 2010 and the first quarter of 2011, the Marcellus core created 7,328 jobs. Total nonfarm employment over the same period increased by just over 87,000 jobs.

An Impact Fee Gift Wrapped for Drillers

Legislation is moving in the state House to enact one of the smallest levies on gas drilling in the nation. House Bill 1950 adopts Governor Corbett's drilling impact fee plan, amounting to a 1% effective rate over the 50-year life of an average Marcellus well. It would be a big gift to drillers.

Nearly every other energy-producing state in the nation levies a more robust tax or fee on drilling. Drillers in Texas will pay five times as much in drilling taxes over the life of a comparable deep well as they will in the Marcellus Shale under the House plan.

The bill also strips authority from cities, boroughs and towns to regulate local gas drilling activity – a right protected by state law and upheld by the state Supreme Court. Local zoning laws will be eviscerated, while property owners hundreds of miles from active drilling sites could find a pipeline running through their subdivision or a compressor station next to their playground, with no recourse.

House Bill 1950 was approved by the House Finance Committee on a party-line vote last week and could come before the full House for a vote the week of November 14. Meanwhile, the state Senate continues to negotiate the details of its own drilling fee plan.

Things will move fast in Harrisburg over the coming weeks. It's time for our lawmakers cross the drillers off their gift list and do the right thing for the people of Pennsylvania.

Giving Away the Store: A Fact Check on Corbett/Ellis Marcellus Fee Plan

Download a PDF of this fact sheet

By Michael Wood, Research Director, & Sharon Ward, Director

The average Pennsylvania Marcellus Shale gas well is projected to generate $16 million over its life.[1]

The Pennsylvania Budget and Policy Center compared four leading drilling tax and fee proposals before the General Assembly to determine the total tax revenue raised by each over the life of an average well. The effective tax rates for the plans ranged from 1.0% to 4.7%. Governor Corbett’s proposal would collect $160,000 over the 50-year life of an average well. A comparable well in Texas would raise $878,500 – five times more than Governor Corbett’s plan.

Plan Total Fee/Tax Revenue Effective Fee/Tax Rate
Scarnati: SB 1100 $505,000 3.1%
Quinn: HB 1700 $710,000 4.4%
Murt/DiGirolamo: HB 1863 $770,000 4.7%
Corbett/Ellis $160,000 1.0%

Other shale gas-producing states ask much more from drillers.

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