Randy Walker’s Armstrong County farm has been in the family for three generations. On 72 acres they grow hay, corn, oats, and care for cattle. A few years ago, Randy leased his land to local energy firm EQT, which built three Marcellus Shale wells on his property. Randy receives damage payments for the acres that aren’t usable during drilling. "The payments aren’t much" he says, "but if I said no, no one would get the benefits."
The drilling site includes two lined ponds, one with fresh water and one with flowback water. "The water has to be at least two feet below the liner’s edge," Randy explains, "and the fence around the pits go eight inches into the ground. When all the wells are drilled they’ll take out the water, and put the dirt back...the well pad will cover less than two acres."
Randy has a good relationship with EQT. "They’ve been so easy to work with. They explained everything to me so I knew what was coming. They’ve been extremely honest...they took care of small problems quickly."
For example, the company couldn’t build a road to move in their equipment due to an existing pipeline that no one would claim. In the meantime, EQT asked permission to use a small farm road. Randy recalls the road being completely destroyed, "It was a quagmire of disaster." Eventually EQT rebuilt the road—a road they would never again use. In fact, Randy later asked EQT to add more gravel, and the same day they were out adding rock.
EQT also took care to protect the environment. "They did all kinds of water testing before and after drilling. I have cattle that drink from a spring just down the hill from the well pad, and we’ve had no problems."
Soon the crews will return and begin a fourth well.
Randy is grateful for the extra income. He notes there are fewer financial pressures, "Life is a lot easier now for my wife and me." Thanks to a leasing bonus and royalty payments, he was able to paint his barn and purchase a higher quality tractor. "There are over 600 acres in my pool. That’s a lot of people benefiting from drilling."
Drilling in rural Pennsylvania isn’t just benefiting landowners. Randy notes his amazement when he visited the drilling pad and saw his brother-in-law from Texas. "He just happened to be assigned to my drilling pad," he chuckles.
It’s not just out-of-staters who are finding work. Randy says he’s always running into locals working on his pad, from mechanics to construction workers. And he’s quick to point out that even the experts from Texas and Louisiana contribute to the local economy. During the construction of his well pad, workers booked rooms at a nearby hotel in Kittanning.
If a severance tax is enacted in Pennsylvania, Randy knows he’ll be the one paying the bill. "My royalties are based on my share of what the wells produce," he explains. "A tax at the wellhead taxes my share and the company’s share, but the companies will just pass that on."
In other words, it’s the landowners and consumers of natural gas heat or electricity that will bear the brunt of the tax. It’s a good reminder that people ultimately pay the taxes levied on corporations.
Randy concludes, "We could run our state economy on this boom if the government would let us. But with more taxes...I just don’t know how many wells won’t be drilled and jobs won’t happen."
State legislators who advocate for an expansion of government incentives for alternative energy sources need to pay attention to the events happening across the pond where the European Commission is abandoning country-by-country targets for greenhouse-gas emissions after 2020.
Mounting debt and surging rates from an over-reliance on renewable energy sources such as solar and wind prompted the commission’s action, reports the Wall Street Journal (paywall):
Take Spain, where financial incentives for renewable energy have driven renewables to as much as 25% of electricity generation. They have also left the country with a $41 billion gap between what energy costs to produce and what utilities can charge for power. Mariano Rajoy's government has been scrambling to scale back the subsidies and close the gap. These efforts have left in the lurch those who installed wind and solar on the promise of high fixed payments for their power.
In Germany, Angela Merkel is also seeking to push through cuts in wind and solar subsidies and to cap new installations of renewable capacity going forward. Germany's feed-in tariffs—which guarantee renewable-energy suppliers above-market prices for their power—have helped drive up retail power prices by 17% in the past four years while costing utilities and small businesses billions. Many of Germany's largest energy users are exempt from the green surcharges, a fact that the European Commission is currently investigating as a possible illegal subsidy.
Moreover, the Journal says, European companies are moving production to the U.S. where the shale gas boom is producing an advantage in energy costs—not to mention a reduction in carbon emissions as natural gas picks up more of the share of electricity generation.
As the Journal said in a separate piece:
“The innovation of the private oil and gas industry in extracting natural gas from shale has done more to reduce CO2 emissions than have all of the Obama Administration's subsidies, mandates and crony-capitalist schemes for renewable energy.”
Another benefit of the gas boom has been lower heating bills, which have remained moderate even during recent cold snaps.
All of which suggests that state Rep. Tommy Sankey (R-Clearfield) is on the right track with his bill to repeal Pennsylvania’s Alternative Energy Portfolio Standards.
The standards—adopted in 2004—require the state’s electric companies to obtain 15 percent of their energy from alternative sources by 2023. Europe’s experience is crystal clear evidence it’s time for government to stop picking energy winners and losers.
The prospects for Pennsylvania coal industry have gotten so bad that Tom Crooks has contemplated moving his company from the state to find greener pastures
Crooks is vice president of R.G. Johnson Co., a Washington, Pa.-based contractor that services the mining industry. "I came here to put a face on the industry," said Crooks, whose company employs 150 people. "We want to stay in Pennsylvania, but…"
As part of the Obama administration’s "War on Coal," the U.S. Environmental Protection Agency (EPA) is to propose carbon dioxide emission standards that could shut down as much as half of Pennsylvania's coal-fired electric generating plants. The agency also has proposed limits on new coal-fired plants that effectively will ban their construction, according to the Heritage Foundation.
Coal provides more than 40 percent of Pennsylvania’s electricity, supports nearly 42,000 jobs and contributes about $7 billion to the economy. The Heritage Foundation estimates that the state would lose more than 28,000 jobs by 2023 as a result of EPA's proposal. Nationally, the estimate is nearly 600,000 lost jobs.
The specter of economic damage drew sounds of alarm from a broad range of organizations represented at a Pennsylvania Department of Environmental Protection meeting.
Speakers said power plants that have invested billions of dollars into pollution-control equipment could be closed because of the new regulations. One such business is the Homer City Generating Station in Indiana County where $700 million is being spent to remove 100,000 tons of sulfur dioxide from the plant’s emissions every year, a reduction of 90 percent.
The Heritage Foundation recommends that Congress stop the EPA from regulating CO2 emissions—a reasoned approach that could save jobs for thousands of Pennsylvanians.
The natural gas boom spawned by free enterprise and new technology is doing more to help the poor than LIHEAP, a decades-old welfare program, according to the Wall Street Journal. At the same time the Journal reports that Germany’s so-called green energy programs are forcing consumers to pay well above market prices for electricity.
A study by Colorado-based energy broker Mercator Energy quantified savings produced by hydrofracturing and horizontal drilling techniques used in the Marcellus and shale deposits across the U.S.:
From 2003-08, shortly before the fracking revolution took hold, the price of natural gas averaged about $7.20 per million BTUs. By 2012 after new drilling operations exploded across the U.S.— from West Texas to Pennsylvania to North Dakota—the increase in natural gas production had slashed the price to $2.80 per million BTUs.
Thanks to the lower price for natural gas families saved roughly $32.5 billion in 2012. (That’s 7.4 billion MMBTUs of residential use of natural gas times the $4.40 reduction in price.) The windfall to all U.S. natural gas consumers -- industrial and residential—was closer to $110 billion.
The Mercator study notes low natural gas prices help low-income families the most because they spend a larger share of their income on energy. Despite energy subsidies:
" . . . lower natural gas prices have still shaved $10 billion a year from the utility bills of poor families."
By comparison, LIHEAP provided approximately $3.5 billion in home-heating subsidies to about nine million households in 2012, the Journal reports. That is only 35 percent of the benefit from lower gas prices.
Meanwhile, government green energy mandates have Germans paying the highest electricity prices in Europe, the Journal says:
This year, Germans will be forced to pay 20 billion euros ($26 billion) for electricity from solar, wind and biogas plants—electricity with a market price of just over 3 billion euros...In the near future, an average three-person household will spend about 90 euros a month for electricity. That’s about twice as much as in 2000.
Low-income Pennsylvanians are the biggest winners when politicians allow safe and affordable energy to be developed rathern than impose mandates designed to pad the pockets of green special interests.
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.
The Delaware River Basin Commission (DRBC) continues to stymie development of the Marcellus Shale in all or parts of 13 Pennsylvania counties even as Governor Corbett, Senator Pat Toomey and property owners plea for an end to the commission's three-year moratorium on gas-well drilling.
Property owners had hoped the DRBC would act on the matter at its July meeting but no action was taken. Bob Rutledge, executive director of the Northern Wayne Property Owners Alliance LLC, says the commission wants to develop the "perfect regulation."
They are completely overstepping the basis of their charter of monitoring water quality and quantity, said Rutledge, whose Wayne County farm has been in his family since the 1840s.
Clark Rupert, a commission spokesman, said the DRBC takes its authority to regulate drilling from its 1963 compact—a broadly worded document that makes no mention of gas wells. The commission has not said when it would act on a proposal to regulate gas-well drilling.
The delay has prompted property owners to explore legal action against the commission, Rutledge said.
On June 27 property owners and Gov. Tom Corbett, an ex-officio DRBC member, sent letters claiming that the commission is infringing on property rights and denying the region of economic benefits.
Gov. Corbett’s letter says:
I am writing to convey a profound sense of frustration and disappointment on behalf of my constituents…
Adoption of this moratorium…was purportedly done to allow for the drafting of appropriate standards that would protect the water resources of the basin. However, deferring the submission of applications until regulations are adopted presumes that regulations will, ultimately, be adopted. That has failed to occur. In their letter, the property owners say that they will be left to conclude that litigation against the commission will be necessary to "regain our right to access our mineral estates" if the commission does not at least act in July to schedule a vote on its proposed drilling regulations.
The Alliance said it had "spent two and a half years…and nearly three quarters of a million dollars to procure a precedent-setting lease that is among the most community- and environmentally friendly leases in existence." The lease is now in jeopardy the Alliance reported.
In our opinion, the Alliance said, the Commission is allowing itself to be held hostage by the media and an emotion-driven anti-drilling community made up mostly of people from outside our region and by activist staffers within DRBC who are exercising their personal biases.
In the meantime, two companies that sought to drill in the Delaware River basin are withdrawing from the region where they would have paid an estimated $187.5 million in leases to landowners. Although the companies named low gas prices as the reason for their change of plans, the inaction of the DRBC could only dampen the enthusiasm of developers.
Rome wasn’t built in a day, but we’re guessing it took less than three years to secure an okay to drill.
With all of its enormous resources, the federal government’s capacity to influence exceeds even that of Hollywood and Madison Avenue. That is why it is so disconcerting when Washington abuses its power to persuade and such good news when one of its misdeeds misfires.
According to National Review Online, the U.S. Environmental Protection Agency (EPA) has backed away from a 2011 draft report that alleged that hydraulic fracturing fluids likely were the cause of contaminated water supplies in Pavillion, Wyo.
The report—released without peer review—generated alarming headlines in national media and contributed to frenzy around similar false allegations in places like Dimock, Pa, which were also proven unfounded. NRO reports the following:
The New York Times reported that ‘chemicals used to hydraulically fracture rocks in drilling for natural gas in a remote valley in central Wyoming are the likely cause of contaminated local water supplies, federal regulators said.’ The Financial Times ran a story headlined ‘EPA blames fracking for Wyoming pollution.’ National Public Radio announced that ‘for the first time, federal environmental regulators have made a direct link between the controversial drilling practice known as hydraulic fracturing and groundwater contamination.’ And the Salt Lake Tribune ran an editorial subtitled ‘EPA report shows water poisoned.’
In reality, the study conclusively proved no such thing. The research was fundamentally flawed, with the conclusion being derived less from science than from politics.
Wyoming state regulators expressed concern over the EPA report, which was found to be based on sloppy research methods that produced a small sample likely tainted by naturally occurring contaminants.
Unlike the Dimock debacle where the EPA confirmed the allegations of contaminated water were unfounded, the agency is choosing to merely drop the Wyoming study without completing the draft report. NRO says:
EPA reps said ... that although the agency ‘stands behind its work and data,’ the study won’t be finalized, and the Obama administration won’t rest on the report’s conclusions.
That’s a nice talking point, but if the Pavillion study could actually stand up to scrutiny, you can bet the EPA would be using it to act—and to act boldly.
But in the end, it didn’t matter much whether fracking had actually contaminated Wyoming’s water; having the public think it did sufficed for the EPA. So go the cynical politics of an agency with an agenda.
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.
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.
"Promised Land," Tinseltown's recent take on natural gas drilling, opened in theaters across the nation this past weekend. Despite a cast of heavy hitters, including Matt Damon, the film grossed a meager $4.3 million (10th place).
Patriot-News columnist Donald Gilliland wasn't impressed either. He encourages audiences to go to a matinee or wait for the film to come out on DVD. Apart from criticizing the "art," he finds the film lacks any semblance to the reality of drilling in Pennsylvania, writing, "The anti-fracking politics of the film are no less misleading than Josh Fox's "Gasland" documentary, but more ham-handed."
New York Post film critic Kyle Smith agrees, calling it "a groaner of an agenda movie" and a film that "gets so cheesy that I suspect it was also secretly funded by Velveeta."
To figure out if the film does in fact reflect rural Pennsylvania, we talked to a real-life land man (similar to Matt Damon's character) Mike Knapp who tells us:
The first two acts of the movie do a pretty good job of accurately portraying land men. Butler [Damon's character] is very caring about the landowners and has full faith that his company is doing the right thing.
But Knapp finds the movie misses the mark when it comes to portraying the drilling process and local landowners:
They [landowners] come across as inarticulate and irresponsible. In one instance, a landowner goes out and blows his check on a Corvette. For folks where the difference between a $100 gas bill and a $200 gas bill can mean not paying other bills, I think it is pretty obnoxious for Mr. Damon to Mr. Krasinski to say you can drill a well on your property because they don't think it is a good idea.
For more on how oil oligarchs and Pennsylvania taxpayers funded the film click here and here. For facts about the benefits and risks associated with natural gas drilling check out Truth, Lies & Answers on Natural Gas Drilling.
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The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.