Energy & Environment

Pennsylvania has always been a leading provider of America’s energy. From timber and coal to the nation’s first commercial oil well, and now the Marcellus Shale boom, traditional energy is vital to our state’s economy. But these industries, and the prosperity they generated, are now threatened because they have become politically unpopular. Instead of entrepreneurship and the responsible development of natural resources, today’s energy companies are rewarded on the basis of their lobbying.  CF’s work on Energy & the Environment focuses on balancing environmental and economic concerns, ensuring a level playing field, and preserving Pennsylvania’s role as an energy leader.


Recent Issues

Lessons from Fracking's Borderlines


New Yorkers shouldn’t have to eye secession to tap the riches beneath their feet. Pennsylvanians shouldn’t have to worry that taxes and regulations will drive away opportunity and raise energy prices. Both states should remind the nation that prosperity is always vulnerable to the heavy hand of government.

Will Lawmakers Renege on ‘No Broad-Based Taxes’ Pledge?


Pennsylvania State Budget

As lawmakers scramble to find revenue to fund the $1.6 billion spending increase they passed last week, a broad-based tax increase, once deemed “off the table,” is in play.

Governor Wolf's Natural Gas Tax Proposal


Governor Wolf continues to press for a natural gas severance tax despite ongoing layoffs and potential bankruptcies in the natural gas industry.


Recent Blog Posts

No Doubt About it: PA has a Severance Tax

tax

What do Christmas festivities, a new office building, and a Ford Explorer have in common? They were all paid for with impact fees on natural gas, raising doubts about the necessity of imposing higher taxes on the industry.

A recent audit of local government spending revealed some officials aren't prioritizing the costs related to natural gas drilling or, worse, the expenses associated with drilling were exaggerated from the beginning.

Back in 2012, when the impact fee was being implemented, we questioned the need for more revenue to offset the local costs of natural gas drilling:

Much of the revenue generated through Act 13 isn't used to address drilling 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 Auditor General's report is proof that such questions were well warranted. It's now clearer than ever that the impact fee is addressing far more than drilling impacts. It is clearly a tax.

Instead of debating the wisdom of the current impact fee (tax), Governor Wolf and others continue to push for an additional natural gas tax. Yet, the IFO estimates the current impact fee is equivalent to a 6.9% severance taxhigher than severance taxes in Louisiana, Wyoming, and West Virginia.

With natural gas prices still climbing from record lows and the industry shedding a third of its jobs in 2016, this audit should put a final nail in the severance tax coffin. Any further effort to raise energy taxes would be a transparent attempt to balance the budget on the backs of working people.

As we've seen, raising niche taxes to fill budget holes is a losing strategy. Only six months ago lawmakers passed new taxes on digital downloads, vape shops, and cigarettes. The result? A estimated $524 million budget shortfall.

Let's avoid repeating our mistake and acknowledge the truth: imposing an additional tax on one industry will do nothing to help solve the state's budget problems. 

.... Read More >

posted by Elizabeth Stelle | 02:45 PM

PA's Conflicted Relationship with Natural Gas

The government giveth, and the government taketh away. Nowhere is this more apparent than in Pennsylvania’s relationship with the natural gas industry.

On the one hand, Gov. Wolf offers a Pipeline Investment Program that would provide $24 million in matching grants to businesses, schools and hospitals for connections to gas pipelines.

On the other, the Pennsylvania Department of Environmental Protection (DEP) proposes new rules on already highly regulated production activities. The gas industry filed a legal challenge to some of the rules. They claim the regulations will cost $2 billion a year “without providing meaningful environmental benefits.” Excluding initial start-up costs, DEP estimates the maximum annual cost of the regulations to be $31 million, or about $24,000 a well.

Meanwhile, Braskem America, a plastics manufacturer, chooses Texas over Marcus Hook, Pa., for the location of a $500 million plant because of Pennsylvania’s lack of pipeline capacity to deliver feedstock.

At the same time, pipeline projects are missing in-service targets due to regulatory delays.

Delayed by about 18 months is the start-up of Sunoco Logistics’ $2.5 billion Mariner East 2 project, which will transport natural gas liquids from western Pennsylvania to Marcus Hook. The company is responding to requests from the DEP for additional information on permit applications.

In New York, the Constitution Pipeline, has languished since April when New York regulators denied the project a water-quality permit. The denial came four months after New York Gov. Cuomo had approved $2 billion in economic-development grants that included an extension from the pipeline to a manufacturing plant.

Pennsylvania should learn from these missed opportunities and stop efforts to finance pipeline extensions to private businesses with tax dollars. After all, Governor Wolf just lamented policies that put well-connected businesses before taxpayers:

" . . . too often, special interests and the well-connected are put before Pennsylvania families and the middle class."

So why not return to citizens the $24 million being transferred from an “underutilized” fund for alternative energy projects? Instead of doling out politically-selected grants, the Governor should focus on ways to balance safety with enhancing the competitiveness of one of the state’s most promising enterprises.

In general, state government is too focused on doling out taxpayer cash and promulgating regulation than on fostering an environment for good-paying jobs and economic growth.

.... Read More >

posted by Gordon Tomb | 03:17 PM

Energy Mandates a Double Whammy

Alternative energy mandates raise the cost of living and make it harder for people to find work. These are the findings of a new paper on the government's futile efforts to manage the energy sector.

According to the paper's author, Dr. Timothy J. Considine, the mandates will adversely affect Pennsylvania, raising energy costs by $700 million and eliminating 11,400 jobs by 2025.

In 2004, Pennsylvania enacted the Alternative Energy Portfolio Standards (AEPS). These mandates require 18 percent of all electricity to be generated from renewable sources by 2021.

More than 98 percent of the new renewable energy capacity for Pennsylvania is supplied by wind power. This means electricity production at coal and natural gas plants fluctuates (or cycles) to accommodate times when the wind does not blow. But cycling reduces efficiency and raises costs.

In 2013, coal remained the largest source of Pennsylvania power, followed by nuclear power at 34 percent and natural gas at 22 percent. In comparison, wind power accounts for only 1.5 percent of total generation.

The high cost of renewable energy mandates isn't unique to Pennsylvania. By 2025, the mandates will destroy more than 150,000 jobs and increase electricity costs by $23.1 billion in 12 states.

If lawmakers want to shield Pennsylvanians from this economic damage, repealing the AEPS and/or refusing to extend the program should be a top priority. Rep. Sankey offered the lastest repeal bill back in 2013. 

Costs of Pennsylvania RPS in 2013 dollars (millions)

 

 2016 

 2020 

 2025 

 2030 

 2035 

 2040 

RPS Legacy Costs

 

 

 

 

 

 

Direct

$210

$206

$201

$196

$192

$187

Cycling Costs

$20

$28

$31

$32

$33

$35

less Fuel Costs

$57

$60

$64

$66

$68

$71

Net RPS Legacy Costs

$173

$174

$168

$162

$156

$150

New RPS Costs

 

 

 

 

 

 

Direct

$324

$544

$622

$651

$680

$710

Cycling Costs

$21

$29

$32

$33

$34

$36

less Fuel Costs

$216

$384

$437

$463

$490

$523

less NGCC Costs

$3

$0

$12

$12

$12

$13

Net New RPS Costs

$125

$189

$206

$209

$212

$210

RPS Tax Subsidies

$203

$291

$326

$343

$361

$379

Total RPS Cost

$502

$654

$701

$715

$729

$741

 

.... Read More >

posted by Elizabeth Stelle | 00:18 PM