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More Than Their Fair Share


Marcellus Shale Fee

A fair and sound tax policy requires that people or businesses pay for the government they use, including the cost of extracting natural gas.  Yet despite the passage of a natural gas "impact fee" nearly two years ago, a few lawmakers and government union bosses insist drillers still aren't paying their "fair share." For example, PSEA union president Mike Crossey joined House lawmakers today for a press conference promoting legislation to increase taxes on drillers.

In reality, gas companies are already paying for more government than they're using, including an estimated $810 million in 2013 royalties to landowners, $500 million on road repairs, and billions in existing state taxes. In addition, gas drillers face the same tax climate common to every other Pennsylvania business, including the highest effective corporate income tax rate in the industrialized world.

Initially promoted as a way to compensate communities for the local impact of natural gas drilling, much of the $400 million in collected by the "impact fee" is funding broad programs that have little connection to natural gas drilling impacts, like the Commonwealth Financing Authority and Growing Greener.

Clearly, the primary goal of a new severance tax isn't just to pay for the government the natural gas industry is using, but to line the pockets of special interest groups like Crossey's PSEA and other government unions that profit off of bigger, more expensive government.

As long as the Marcellus miracle continues, those lobbying for government handouts will keep calling to increase the industry’s taxes and fees—which would effectively raise engergy costs across the state.

Those calls should be ignored because gas drillers are already paying for the costs of government they use, and more.

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Obama & Sebelius Visits Show Free Markets Trump Big Government


President Obama and one of his cabinet members are making separate trips to Pennsylvania this week.  Their reasons for visiting couldn't be more different.

Today, the President will speak on education and jobs at Lackawanna College in the heart of the Marcellus Shale boom, which has ushered in unprecedented job growth and lower utility rates for consumers across PA.

Gas production numbers continue to surge. Moreover, this renaissance is providing the educational opportunities President Obama can only talk about.  George Stark of Cabot Oil & Gas explains how companies are not only hiring, but also helping to train workers at Lackawanna College in this op-ed.

A few hours south of the President's visit, Secretary of Health and Human Services Kathleen Sebelius traveled to Philadelphia to make another sales pitch for Obamacare yesterday.

Why does Sec. Sebelius need to travel the country to sell a law long on the books? Because the sad reality is Pennsylvanians are not seeing more affordable health care.  Rather, spouses are being cut from some insurance plans, workers’ hours are being reduced and premiums are skyrocketing.

Instead of selling a failed policy, we need to truly make health care affordable by allowing more innovation and returning choice to patients.

The contrast between Marcellus Shale and the Affordable Care Act is just one more example of the failure of big government, compared with the success of free markets and entrepreneurs, in improving the lives of everyday Pennsylvanians.

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Gasland Part II: New Name, Same Propaganda

JULY 12, 2013 | by JOHN BOUDER

Frack Attack

Remember the frackaphobic film Gasland (2010) directed by Pennsylvania native Josh Fox? Although a documentary in name, we proved the film to be largely fictional. Despite critical acclaim and an Oscar nomination, the film grossed a meager $30,000 at the box office.

But that hasn’t stopped Mr. Fox from filming a sequel creatively titled Gasland Part II.

Thankfully, the Washington Free Beacon saved us the trouble of watching it by publishing their own fact-check. The Beacon focuses on four of the new film’s main hydraulic fracturing myths summarized below.

Myth: Water contamination is caused by fracking.

Fact: Ironically, as we reported earlier this week, the EPA backed away from the very study cited in the film that supposedly showed fracking at fault for contaminated water in Wyoming.

Myth: One flawed study proves natural gas is not environmentally friendly.

Fact: Fox cites a single outlier study with obvious flaws to assert natural gas is not environmentally friendly. This would be news to no less a green energy advocate than President Obama.

Myth: Fracking causes earthquakes.

Fact: The Free Beacon points out that minor tremors have been associated with poorly placed waste water disposal injection wells, not the fracking process itself.

Myth: Well casings and safety precautions are inadequate.

Fact: Fox uses a scary article showing 60 percent of well casings fail within 30 years. But the article refers to wells drilled under the ocean in the Gulf of Mexico using a different method than the land-based natural gas industry uses. Another study on land-based wells in Ohio and Texas showed an infinitesimal .00006 percent failure rate (14 of 220,000 wells).

So, why is it so important to combat these falsehoods?

The Times-Tribune reported last week that Scranton area residents are paying one-third less for natural gas than five years ago. Marcellus Shale Coalition spokesman, Pat Creighton, commented, “We are flush with gas in the United States, and that is a direct benefit to the consumer.”

Lower energy prices don’t just benefit consumers, either.

An Austrian steelmaker is actually outsourcing a production facility with 150 jobs to the U.S.—Texas to be exact. Why? Due to fracking, the natural gas used to power industrial smelters costs 75 percent less here than in Europe. Natural gas is fueling economic growth nationwide and here in Pennsylvania.

For an honest take on the fracking’s impact, and an entertaining takedown of Josh Fox’s propaganda, watch the documentary FrackNation instead.

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Demanding More Dollars From Drillers

MAY 20, 2013 | by GORDON TOMB

Marcellus Shale Fee 2

Pennsylvania’s new drilling impact fee has not deterred special interests from demanding more money from the state's most prolific producers of new energy.

Act 13 of 2012 imposed fees on natural gas wells that are based on the value of the natural gas produced. The fee for the first year of a horizontal gas well ranges from $40,000-$60,000, depending on the price of gas. The state expects to collect $400 million in just the first two years of this fee.

The price of natural gas has steadily declined over the past two years due to an abundance of supply—saving Pennsylvanians hundreds on their energy bills. Now those who depend on big government are suggesting the state should base the fee on the volume of gas produced rather than on its price to get even "more" tax revenue.

John Hanger, a Democratic candidate for governor, went even further, calling the impact fee "a huge subsidy to the gas industry." A fee is now a subsidy? How Orwellian!

Claims that Pennsylvania collects less money from producers than other states are missing the big picture. Patrick Henderson, Gov. Corbett’s Energy Executive, says the critique ignores more than $1.7 billion in state taxes paid by oil and gas operators since 2007. Plus, the commonwealth’s taxation begins in a well's first year while other states exempt taxes for the initial few years, says Kathryn Klaber, president of the Marcellus Shale Coalition.

It may be fair to expect an industry to compensate for its negative impacts on local infrastructure, such as damaged roads; however, even the current impact fee goes beyond that by sending money to counties that have no gas wells.

Changing the law to maximize tax revenue would create chaos for companies doing business in the state, and would run the risk of driving the businesses themselves to other, more business-friendly gas-producing states. Despite the claims of critics, gas drilling has created tens of thousands of jobs, and provided billions to Pennsylvania residents in royalty and lease payments.

But the groups that depend on taxpayer funding as part of their business model aren't satisfied with the benefits for Pennsylvania families, they just want more for themselves.

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Free-market Gas Outshines Subsidized Solar

APRIL 9, 2013 | by GORDON TOMB

One news story highlights hundreds of jobs lost and millions of taxpayer dollars down the drain via corporate welfare. Another celebrates millions of new state revenue and free market job creation. This contrast offers a lesson for lawmakers.

The closure of Pittsburgh-based Flaberg Solar, a manufacturer of mirrors for the solar energy industry, is a tragic story of job loss and taxpayer abuse. Flaberg was awarded $10.2 million in stimulus funds and received an additional $10 million in state grants, putting taxpayers on the hook for up to $20 million.

(T)he current order and market situation in the North American solar market does not offer any prospect of profitably justifying to continue [the plant's operation], said Flaberg Solar's parent company in a statement.

Flaberg Solar, which once employed 200 people, says it cannot afford to pay former workers severances owed them. Vendors stand by with uncollected receivables as the company projects a debt of as much as $7 million.

A second article reported that the commonwealth expects to collect $400 million from the Marcellus Shale Impact Fee in the first two years of the tax's existence.

Although the tax was an unnecessary money grab, its success in generating revenue demonstrates the ability of private ventures to produce thousands of jobs, economical energy and billions of dollars in wealth without government aid.

The entrepreneurial spirit exemplified in the development of Pennsylvania's Marcellus Shale is key to the higher standard of living Americans enjoy. In contrast, corporate welfare schemes like subsidies for Flaberg Solar squander capital and destroy jobs.

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FrackNation Exposes Gasland Lies

MARCH 14, 2013 | by GORDON TOMB

"FrackNation" is not only about the development of natural gas, but also about journalism, says Phelim McAleer, co-director of the 70-minute documentary.

Shown this week to about 70 people at a meeting of the Tea Party Patriots of Central Pennsylvania in suburban Harrisburg, the recently released video debunks virtually everything the 2010 pop documentary "Gasland" used to demonize gas drilling in Pennsylvania and elsewhere.

For example, an assertion that gas drilling resulted in drinking water being contaminated with three types of uranium, including two of "weapons grade," is one of many ludicrous claims in "Gasland."  Weapons-grade uranium, made with highly sophisticated equipment typically at the cost of many millions of dollars, does not occur naturally.

"What journalist would put that out without checking with experts?" asked McAleer, an Irish journalist, who was a correspondent for The Financial Times and The Economist before becoming a filmmaker.

"FrackNation," subtited "A Journalist's Search for the Fracking Truth," premiered Jan. 22 on AXS TV and has received strong reviews from The New York Times and National Journal.  It is available for sale on the documentary's website.

Anne McElhinney, McAleer's wife and also a co-director of "FrackNation," will speak at the Pennsylvania Leadership Conference April 20.


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Carbon Tax Devastating for Manufacturers

MARCH 7, 2013 | by GORDON TOMB

A study reported by the Pennsylvania Manufacturers' Association says a carbon tax would have a devastating effect on the state's manufacturers.

Manufacturing output in energy-intensive activities could drop by as much as 15 percent as a carbon tax increases prices of natural gas, electricity, gasoline and other energy commodities, according to the study conducted by NERA Economic Consulting.  The decline in less energy-intensive businesses could be more than seven percent, according to the study, Economic Outcomes of a U.S. Carbon Tax.

A carbon tax has been a popular proposal for combating global warming.

Key findings of the study include the following:

  • A carbon tax would deal a blow to employment in Pennsylvania with a loss of worker income equivalent to 77,000 to 81,000 jobs in 2013 and 96,000 to 122,000 by 2023.
  • The cost of using natural gas would increase by more than 40 percent in 2013, the first year of the carbon tax study, adding to household energy bills and increasing operation costs for many Pennsylvania businesses.
  • Gas prices at the pump would jump by more than 20 cents a gallon in 2013.
  • Households in Pennsylvania would see a significant increase in their electricity rates, with an average increase of 13 percent in 2013.
  • By 2023, the hardest hit economic sectors in Pennsylvania would be coal, which would lose between 48 and 54 percent in economic output, and energy-intensive manufacturing, which would lose 1.9 percent, and non-energy-intensive manufacturing, which would lose between .5 and .9 percent.

To view the Executive Summary of the study, please click here. To read the entire study, click here.


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3 Reasons Marcellus Gas Tax Misses Mark


A new report shows that Marcellus Shale drillers will dole out $206 million to satisfy the state's tax (or "impact fee") on natural gas production in 2011.

The tax-eaters will surely surface shouting their "fair share" mantra, demanding the industry pay even more. But consider these three under-reported facts:

  1. Drillers were already paying taxes and fees, and contributing to local causes.

    Before Act 13, drillers paid the taxes common to every other business in Pennsylvania. Now, they pay more. Further, state law holds drillers responsible for environmental and infrastructure damages.

    And companies have become an integral part of local communities. For example, Cabot Oil and Gas is actively involved in Susquehanna County where it drills. It funds a $50,000 scholarship to help students attend the Susquehanna County Career & Technology Center, participates in the Harford fair 4-H Livestock Auction, and recently contributed $2.2 million for a physician's clinic in Montrose.

  2. While state law requires drilling companies to repair damaged roads, many drilling companies were going the extra mile to improve roads. The Marcellus Shale Coalition estimates the industry paid out more than $200 million in privately funded road repairs in 2010 alone—as much as the "fee" generated for 2011.

  3. Much of the revenue generated through Act 13 isn't used to address drillings impact—Marcellus Shale isn't responsible for deteriorating bridges and parks in midstate counties where drilling doesn't even occur. Act 13 sustains unrelated programs such as Growing Greener and is littered with corporate welfare like subsidizing rail freight assistance and natural gas vehicles.

The natural gas tax will have a negative impact, whether it's through reduced investment in the state, reduction in job growth or a reduction in spending on things like road improvements and charity. Politicians shouldn't single out the drilling industry, which is creating tens of thousands of jobs, rescuing families from foreclosure, generating prosperity for small-business owners and lowering energy rates. 

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EPA Wants to Scare Jobs Out of Pennsylvania


The Environmental Protection Agency's derailing of American's economy is frightening enough to scare even the Ghostbusters (and they ain't afraid of no ghost).

Pennsylvania will be the 7th hardest hit state by the EPA's regulatory nightmare, costing the commonwealth more than 23,000 jobs while raising electricity rates by nearly 11 percent, according to American Legislative Exchange Council.

According to Count on Coal, an organization that educates citizens on how coal keeps electricity affordable, Pennsylvania gets 49 percent of its electricity from coal and the industry generates tens of thousands of jobs. That is, until the EPA forces 10 Pennsylvania coal power plants to shut down by 2015.

The EPA's powers are being challenged by many, including Pennsylvania's governor. A coalition letter signed by Gov. Tom Corbett opposing the EPA overreach states:

...EPA's actions are adding to already overburdened state resources and are limiting the ability of states to administer their own, effective environmental programs and further slow the nation's economic recovery.

Similarly, the Pennsylvania Public Utility Commission said the EPA's approach "appears to be regulatory overkill and, more importantly, could threaten cost effective and reliable provision of electrical services in our State."

Unfortunately, the EPA has become a regime of regulations without representation. Learn more here.

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The Facts about Fracking and Physicians


Yesterday's statement by the Pennsylvania Medical Society President Marilyn Heine should put to rest the recent panic over a provision in Act 13—the newly enacted Marcellus Shale legislation (HB 1950)—addressing physicians' access to chemical information used during hydraulic fracturing.

Dr. Heine stated [emphases added]:

As physicians, our first priority is the health of our patients. We applaud the Corbett administration and the legislature for enacting a law that forces natural gas drillers to publicly disclose the chemicals they use as part of the hydraulic fracturing process. More importantly, language in Act 13 demonstrates their concern for public safety by empowering physicians, when they need to treat patients, with the ability to obtain from drilling companies "proprietary chemical compounds" not otherwise publicly disclosed.

...We are gratified by the strong public assurances from the Department of Health, Speaker Smith and House Majority leader Mike Turzai that their intent in drafting the law was for physicians to be able to speak freely with their patients, other health care providers involved in the care of their patients, and appropriate public health officials. Those statements clearly demonstrate their commitment to the health and welfare of all Pennsylvanians.

Act 13 was not written to create a barrier between physicians and their ability to treat patients. It was intended to and does just the opposite—ensures the medical community has access to any and all information to best care for their patients. 

Moreover, the language in Act 13 addressing chemicals used in hydraulic fracturing is being called "the most progressive disclosure requirements in the nation." It's unfortunate that instead of celebrating this accomplishment, anti-drilling groups try to drum up fear even when it's unmerited.  

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