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- Republican Governors Opt-In to Medicaid Expansion
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- Jan. 14 Workshop:HOW TO RUN FOR ELECTION BOARD IN 2013; HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Seth Williams on Guns, Jasmine Rivera on School Closures @PFC Meetup Wednesday
- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
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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.
- The Associated Press — Pennsylvania foundations draw cheers, protests for supporting fracking studies:
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.
- Jim Efstathiou Jr., BloombergBusinessweek — Penn State Faculty Snub of Fracking Study Ends Research:
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.
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.
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.
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:
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.
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 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.
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.
The Pennsylvania Legislature is debating a Marcellus Shale impact fee today, but unfortunately both the House and Senate appear to be playing a game of limbo to see how low they can go on a drilling fee rate.
Governor Tom Corbett’s proposed drilling impact fee, contained in HB 1950, would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate. Senator Joseph Scarnati’s SB 1100, as amended on November 14, would raise $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 proposal from August 2010 would collect more than these plans.
Other drilling tax and fee plans, proposed by Representatives Tom Murt and Gene DiGirolamo and Representative Marguerite Quinn, would put Pennsylvania more in line with other energy-rich states, assessing effective rates between 4.4% and 4.6% over the life of an average well. The average Marcellus Shale gas well in Pennsylvania is projected to generate $16 million over its life.
Check out the Pennsylvania Budget and Policy Center's recent fact check on the Marcellus Shale tax and fee plans that are now before the General Assembly.
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.
Any doubt about the level of public concern over Marcellus Shale drilling in Pennsylvania should be put to rest by the turnout at a series of citizens hearings over the past six weeks. Hundreds came out to testify about the impacts of drilling in their communities at hearings held by the Citizens Marcellus Shale Commission in Williamsport, Towanda, Philadelphia, suburban Pittsburgh and Harrisburg.
In the state Legislature, momentum is building among lawmakers to get tougher on Exxon, Andarko, Shell, and the other big natural gas drillers that have been extracting this non-renewable resource tax-free for the past three years. Legislators remember coal: when this industry is gone, we want to have something to show for it.
Every other state with significant mineral wealth is taxing it, and most use that revenue to educate the next generation’s workforce, protect our environment, maintain transportation and information networks, and otherwise build a stronger economy. Because we know this boom won’t last forever, we need to lay the groundwork for a better future for our children and grandchildren.
In a recent article examining the impact of Marcellus Shale drilling in Pennsylvania, The New York Times asked me to put the state's tax policy on gas drilling in perspective. I explained that drilling isn't producing the tax revenue needed to address the significant impacts of drilling or to support shared state priorities. Reporting from Montrose, Pa., reporter Kit Seelye writes:
The [Marcellus Shale] gas boom is transforming small towns like this one (population 4,400 and growing) and revitalizing the economy of this once-forgotten stretch of rural northeastern Pennsylvania. The few hotels here have expanded, restaurants are packed and housing rentals have more than doubled ...
But the boom — brought on by an advanced drilling technique called hydraulic fracturing, known as fracking — has brought problems too. While the gas companies have created numerous high-paying drilling jobs, many residents lack the skills for them. Some people’s drinking water has been contaminated. Narrow country roads are crumbling under the weight of heavy trucks. With housing scarce and expensive, more residents are becoming homeless. Local services and infrastructure are strained.
“Very little tax revenue goes to local governments to help them share in the benefits of the economic development,” said Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, an independent policy research organization.
On Tuesday, I joined state Representatives Tom Murt and Gene DiGirolamo at a press conference announcing their bill to enact a natural gas drilling tax that would support shared statewide priorities like education and human services, as well as local impacts and environmental protection.
Almost 98% of natural gas produced in the United States is subject to a drilling tax or conservation fee. This legislation would finally put Pennsylvania into the mainstream of energy-producing states. It would address the impacts of drilling but go beyond that to support economic growth and more opportunities for Pennsylvanians.
You can listen to a two-minute podcast of my remarks from the press conference below and click here to read more about the Murt-DiGirolamo plan (including a link to the lawmakers' co-sponsorship memo).
Sharon Ward, Director of the Pennsylvania Budget and Policy Center, issued the following statement on Governor Corbett's proposed impact fee on drilling in the Marcellus Shale::
"Governor Corbett has proposed a small, limited fee that fails to capture for Pennsylvanians the true worth of this vast natural resource, and fails to fully offset the short and long-term damage that will be done by the industry. The proposal sells Pennsylvanians short.
"Pennsylvania has been called the Saudi Arabia of natural gas. The Commonwealth should do what resource-rich countries like Saudi Arabia have done and use gas revenues to invest in our communities and build a stronger statewide economy. A more robust fee would support infrastructure, public investments and jobs across the state and would provide additional revenue to local governments to pay for the impacts of drilling.
"Other proposals now before the Legislature would generate far more than the Governor's plan would for local and state impacts, and offer a better deal for Pennsylvanians.
"The Commonwealth should also move swiftly to put in place stronger regulations and improved enforcement to protect local communities and the environment. The best way to address the negative impacts of natural gas drilling is to avoid them.
“There is bipartisan support in the Legislature for a drilling tax or fee that supports shared priorities like education and health services, as well as local impacts and environmental protection. We hope the final drilling fee will adopt this approach and count all Pennsylvanians in.”
Last week, Pennsylvania Governor Tom Corbett signaled his support for enacting an impact fee on Marcellus Shale gas drillers. His plan would use fee revenue to pay for statewide environmental cleanup and local impacts, such as road and bridge damage, the Governor said on his new radio show. He plans to release more details as early as this week.
This is a significant development for Governor Corbett, who was initially skeptical of a drilling tax or fee. As The Philadelphia Inquirer reported last week:
He had stuck to a pledge made in last year's gubernatorial campaign to oppose any new taxes — or fees — on anyone for anything. Since taking office in January, Corbett has softened that stance, saying at first that he would consider a local impact fee on the drillers, then saying he was in talks about one with GOP legislative leaders. His Marcellus Shale Advisory Commission studied the issue and recommended an impact fee.
The Pennsylvania Budget and Policy Center will have an update when the new fee proposal is introduced.
The folks at the Penn State Marcellus Shale Education & Training Center, a collaboration of the university’s College of Technology and Agriculture Cooperative Extension service, took a look at the Marcellus Shale’s impact on Pennsylvania employment and income in 2009.
So what did they find? The Marcellus Shale is creating jobs, development and increased income, but at a much more modest level than predicted by industry studies.
The report brings a more detached eye to the question of the economic impact of gas drilling than previous industry-funded reports. It offers a more realistic assessment of the economic effects and contemplates the uncompensated costs to paint a fuller picture of the role of gas drilling to the state’s economy.
The authors surveyed hundreds of businesses, landowners, and government officials; gathered gas industry spending data; and put the information in an economic model to estimate the statewide impact of the industry.
The report makes clear that gas drilling brings additional wealth to leaseholders but that it also brings additional headaches, and costs, to municipal officials struggling with gas-related impacts for which many receive no offsetting tax income.