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.
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.
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.
"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.
There's a memorable line in Promised Land, the new Matt Damon movie opening Friday about a gas drilling company buying land rights in a declining farming community. One character fighting the industry's arrival tells Damon, who plays the gas industry's morally ambivalent landman, "We're not fighting for land, Steve--we're fighting for people."
It's a pity, then, that the Middle East-funded film takes such an anti-people approach to fracking. The film assumes that gas drilling is bad for the environment, laying waste to land and livestock, and that the industry preys on a suffering community's desire for wealth and good schools just to turn a profit.
So far, so Hollywood. Big industry rarely gets more than this false celluloid caricature, even though in Pennsylvania, fracking has created over 102,000 jobs, lowered utility bills, and helped real farmers like Bradford County's Jim VanBlarcom, who was able to double his dairy herd size by leasing his land. And contrary to popular belief, fracking has not contaminated the water supply.
Moreover, the gas industry has boomed without taxpayer subsidies and paid all the taxes common to other businesses plus a special impact fee. That's the double irony of Promised Land: It isn't only anti-people on fracking, it's anti-Pennsylvanians because of the Film Tax Credit used to fund its Pittsburgh-area filming.
Pennsylvania taxpayers doled out more than $4 million through the Film Tax Credit for the movie. For those unfamiliar with the Film Tax Credit, it is unique among tax breaks in that it is "transferable." That is, even if the production company (in this case, Gramercy Productions) doesn't owe any state taxes, they can sell the remainder of their tax credit to another company.
We've noted how corporate welfare for Hollywood studios doesn't "create" any jobs, but shifts economic activity from one area to another. A tax break for one industry requires higher tax rates on everyone else, hindering job creation in every other sector of the economy—which hurts Pennsylvanians everywhere.
In real life, natural gas drilling has revitalized communities across Pennsylvania and helped people to better lives and incomes. For more stories of families benefiting from gas drilling in Pennsylvania, check out The Real Promised Land .
The shale gas boom has boosted the economy in key battleground states like Ohio and Pennsylvania, which may help President Obama, despite his hostility towards fracking—the process which made the gas boom possible.
A new short documentary featuring CF's own Matt Brouillette, the Dinosaur Election, discusses this potential irony and the threats a radical anti-fracking agenda present to our prosperity.
A new anti-fracking movie, Promised Land, is set to release in a couple of months, but controversy around the movie is already in full swing.
The film has come under fire because one of its financiers is a state-owned enterprise of Abu Dhabi. The Abu Dhabi government-owned oil company operates in direct competition with American gas and oil, which has become more accessible and lower priced thanks to fracking. In other words, oil barons in the Middle East are partnering with Hollywood to attack the greatest energy boom in a generation.
But Promised Land's problems aren't isolated to questions over the film's financiers. Phelim McAleer explains:
I broke the news that "Promised Land" was about fracking and now I can reveal that the script's seen some very hasty rewriting because of real-world evidence that anti-fracking activists may be the true villains.
In courtroom after courtroom, it has been proved that anti-fracking activists have been guilty of fraud or misrepresentation.
There was Dimock, Pa. - the likely inspiration for "Promised Land," which is also set in Pennsylvania. Dimock featured in countless news reports, with Hollywood celebrities even bringing water to 11 families who claimed fracking had destroyed their water and their lives.
But while "Promised Land" was in production, the story of Dimock collapsed. The state investigated and its scientists found nothing wrong. So the 11 families insisted EPA scientists investigate. They did - and much to the dismay of the environmental movement found the water was not contaminated.
Hollywood is the land of fiction, so no one should be surprised when a movie like Promised Land attempts to construct a story that isn't based on fact. Unfortunately, the stars in Hollywood and Middle East emirates are not the only groups engaging in a frack attack.
The reality is far different than the Hollywood portrayal of the fracking bogeymen. Fracking in Pennsylvania has created jobs, lowered utility bills, and contrary to popular belief, has not contaminated the water supply.
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.
- 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.
- 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.
- 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.
Back in 2010, Pennsylvania was as attractive to drill in as Cambodia. The state ranked 66th out of 133 jurisdictions worldwide, according to the Fraser Institute's Global Petroleum Survey. Two years later, the Keystone State jumps to the 34th spot thanks to improvements in:
- Regulatory climate (72nd in 2010, 58th in 2012).
- Political risk (64th in 2010, 26th in 2012). In 2010, Pennsylvania House Democrats proposed one of the highest natural gas taxes in the nation.
- Labor availability, e.g., skilled workers and specialists (48th in 2010, 6th in 2012).
While Pennsylvania is improving, we're far from the top. Neighboring states directly competing with Pennsylvania for jobs score significantly higher: Ohio (14th) and West Virginia (10th).
Regulatory burden, taxes and the state's overall business climate matter. It's no coincidence that Ohio's ranking plummeted from the second most attractive place in the world to drill to 14th when politicians discussed more taxes and regulations on exploration. Significant changes in Ohio's ranking include:
- Environmental regulations (11th in 2010, 17th in 2012).
- Uncertainty regarding current regulations (36th in 2010, 38th in 2012).
- Labor regulations (2nd in 2010, 20th in 2012).
In order for Pennsylvania's ranking to continue to climb, policymakers shouldn't enact new taxes or erect additional barriers to economic prosperity.
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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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.