Troubling: Follow Marcellus money
Harrisburg — Hunters and anglers have heard the politicians and watched the industry commercials on television touting clean energy, natural gas for 100 years, and energy independence for the United States.
However, the industry’s rush to drill has flooded the market and lowered the price of natural gas to the extent that several companies – Chesapeake, Shell and Exxon – have all but dropped out of the Marcellus shale gas extraction business.
In 2011, Dominion received approval to export natural gas. A pipeline constructed to supply a coastal city, such as Philadelphia, is only a few steps away from exporting natural gas to other countries where it will garner a much higher price.
Such projects are already being planned and discussed within the industry – our claimed “100-year supply of energy independence” might be shipped overseas to the highest bidder.
“Energy independence is a good sound bite,” said Mike Wood, research director for the Pennsylvania Budget and Policy Center, a nonprofit think tank.
“However, gas companies are in the business to make money and it looks like exporting is the way for them to make it.”
Pennsylvanians are left to suffer what Wood called the “extraction curse” – disturbed habitat, as well as lower air and water quality.
Much can be learned by “following the money.” While this is always true in TV crime dramas, unfortunately it seems just as applicable to Pennsylvania politics. When it comes to the Marcellus shale gas play, there is a mountain of money to follow.
Billions of dollars worth of natural gas lies trapped in the Marcellus shale formation 1 to 1.5 miles beneath the surface of Pennsylvania.
It takes millions and millions of dollars to lease drilling rights, compensate for surface disturbance, drill thousands of feet underground, build water storage facilities, transport millions of gallons of water to each well, frack the well and begin extracting the gas.
Millions more dollars are needed to haul away and/or recycle used frack water, and to construct pipelines and compressor stations to get the gas to market. As the gas is extracted, millions more are paid to mineral rights owners in the form of royalties.
According to an Allegheny Institute for Public Policy study (as reported in the online newsletter, Business Wire) Pennsylvania’s share of the Marcellus shale royalty money in 2012 should be upwards of $730 million – up from $86 million in 2008.
Some Marcellus money supports local charities, sponsors Little League teams and improves highways, and also reaches many places that you might not expect.
The Marcellus Shale Coalition supports the Pennsylvania Federation of Sportsmen’s Clubs – its logo is on the federation’s website. The Unified Sportsmen of Pennsylvania has shared a booth at the Harrisburg sports show with the Pennsylvania Independent Oil and Gas Association.
Range Resources, a major Marcellus company, is a supporting member of the Pennsylvania Outdoor Writers Association.
There is no doubt that the Marcellus shale play has brought jobs and prosperity to some individuals, businesses and communities. According to the most recent Pennsylvania Department of Labor and Industry figures, the oil and gas industry now directly employs 28,155 people – up from 17,414 in 2009.
However, many of these people are not Pennsylvania residents.
Money goes to workers and mineral rights holders, and that is good. However, a large piece of the Marcellus pie – some say an alarmingly large piece – has also gone into influencing Pennsylvania’s politicians.
According to Common Cause and the Conservation Voters of Pennsylvania, the natural gas industry has spent more than $29 million in campaign contributions and lobbying efforts in the past dozen years.
Top recipients of industry money given between 2000 and April 2012, included Gov. Tom Corbett, $1,813,206; Senate President Joseph Scarnati, R-northcentral Pa., $359,146; Rep. Dave Reed, R-Indiana, $137,532; House Majority Leader Rep. Mike Turzai, R-Allegheny, $98,600; Sen. Don White, R-Indiana, $94,150; and Jake Corman, R-Centre, $91,290.
Of the top 50 political recipients, 34 were Republicans and 16 were Democrats.
“The industry has largely had its way in Pennsylvania and has spent millions to put their friends in the state Legislature and the governor’s mansion,” said James Browning, regional director for the non-partisan group Common Cause.
“Pennsylvania politicians sold gas companies the right to pollute Pennsylvania’s land, air and water for bargain-basement prices,” said Josh McNeil, executive director of Conservation Voters of Pennsylvania.
“For their $29 million political investment, gas companies avoided hundreds of millions in taxes that could have paid for thousands of teachers, roads and desperately needed environmental protections.”
Has the industry’s “investment” paid off? Let us count the ways.
The Department of Conservation and Natural Resources issued Marcellus shale gas leases in 2008 and 2010 totaling 138,866 acres and generating $413 million in bonus revenue.
“There was a policy decision – Gov. Rendell decided to lease state forest lands and made the decision to divert the up-front money – hundreds of millions of dollars – to balance the general fund,” said former Pennsylvania Department of Environmental Protection Secretary David Hess.
“Almost all of the up-front money, the signing bonuses, went to balance the state budget instead of staying in the Oil and Gas Fund.”
The Oil and Gas Fund was established in 1955 as the depository for all revenue generated from oil and gas leases on state land. In brief, its purpose is to fund special conservation projects and to mitigate the impacts of mineral extraction on public land.
Corbett continued the trend started by former-Gov. Ed Rendell, with millions more diverted from the Oil and Gas Fund to help balance the state budget.
There is still no extraction tax in Pennsylvania – drillers pay a 2 percent “impact fee.” Pennsylvania continues to be the only major natural gas producing state without an extraction tax. Neighboring states have a 4-5 percent extraction tax.
Sens. Scarnati and White sponsored SB 1047 – legislation that critics say would weaken the independence of both the Fish & Boat and Game commissions, making the process to add endangered species or identify wild trout streams more political.
Rep. Reed co-sponsored the companion House Bill 1576. Prime sponsor of HB 1576, Jeffery Pyle, R-Armstrong, received $48,961 from the oil and gas industry. These bills are supported by the Marcellus shale industry.
According to many of those who follow the Marcellus money, the raiding of the long-established Oil & Gas Fund to balance the state budget and finance the day-to-day operations of the Department of Conservation and Natural Resources is a crime.
While the DCNR budget has remained relatively static in recent years, the percentage of money coming from the general fund has decreased dramatically, with the difference appropriated from the Oil & Gas Fund.
Joe Markosek, D-Allegheny and Westmoreland, minority chairman of the House Appropriations Committee, explained what happened.
“In the 2007-08 fiscal year, oil and gas rents and royalties made up just 1.1 percent of DCNR’s total budget; in 2012-13, DCNR depended on the natural gas industry for 29.8 percent of its annual budget.
It is 33.83 percent this fiscal year,” he explained.
“Money that was supposed to be used to fund improvements in state parks and state forests was instead used to pay staff salaries, pay the electric bill and buy paper clips,” added Hess.
The Marcellus shale play has helped the economy in the short term. The long-term effect on the environment has yet to be seen. Two things are certain – the industry will endeavor to make money and Pennsylvanians will suffer the extraction curse.