Energy 101

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 that accompanied them, 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.

EnergyFactsPA, a project of the Commonwealth Foundation, provides a guide to the key energy and environmental issues facing Pennsylvania. 

Natural Gas

The Marcellus Shale formation is believed to be the largest unconventional natural gas reservoir in America, and its exploration has been coined a modern-day gold rush.

  • More than a mile underground, this once unreachable gas is now recoverable thanks to advancements in horizontal drilling and hydraulic fracturing technology.
  • Development of the Marcellus Shale has the potential to create 111,000 jobs and contribute $987 million in revenue to Harrisburg by 2011.
  • In 2009 alone, the Department carried out 14,544 drilling site inspections, with over 190 employees working full-time on oil and gas oversight, assuring the industry is held accountable.

Many feel the environmental risks posed by drilling outweigh the benefits in job growth and overall economic prosperity.

  • In response to these concerns, proposals exist to impose additional taxes and regulations on the industry, yet little proposed tax revenue will be set aside for environmental purposes.
  • States with difficult to drill formations, like Marcellus Shale, delay or suspend their tax until drilling companies recoup investment costs, unlike the current severance tax proposals in Harrisburg.

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Alternative Energy

Pennsylvania lawmakers have approved over $2 billion in taxpayer subsidies for alternative energy since 1999. In addition to subsidies, Pennsylvania has Alternative Energy Portfolio Standards (AEPS) that require electric utilities to provide an increasing proportion of their energy from alternative sources. This creates an artificial market for alternative energy producers that taxpayers are forced to fund. It is important Pennsylvanians understand how these proposed policies negatively affect the Commonwealth.

  • States with binding renewable portfolio standards, like Pennsylvania, have electricity rates that are nearly 40 percent higher than states with no mandate.
  • Rather than create jobs, policies (subsidies and mandates) to encourage alternative energies merely shift jobs from one industry to another.
  • Subsidies and mandates create perverse incentives for energy providers, encouraging them to spend their time lobbying in Harrisburg.
  • A Spanish study concluded that subsidizing renewable energy leads to a loss of 2.2 jobs for every one green job created.
  • Pending proposals in Pennsylvania would increase the state’s solar alternative energy requirements.

The motivation for creating renewable energy and green jobs is well intentioned, but harmful to the economy — it drives up electricity prices.

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Electric Choice and Competition

In the late 1990s, Pennsylvania’s electricity rates were 15% above the national average, despite the abundance of low-cost coal generation in the Commonwealth, and electricity was sold by a monopoly utility provider per designated region. Then federal regulations changed, allowing electricity markets to develop. The PA General Assembly responded with the Electricity Generation Customer Choice and Competition Act, signed in December 1996, allowing consumer choice and generation competition.

  • Fearful of price gouging and initial market fluctuations, legislators tweaked the bill to place rate caps on utilities, which are now expiring.
  • On December 31, 2010 the last of the rate caps will expire, allowing all consumers to have a choice and, thus, greater control over their electric bill.
  • Consumers can leave a generation supplier if they experience bad service or if rates change, and they can customize their energy use with green options and conservation programs.
  • None of this was possible under the old monopoly system.

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Climate Policy

The science of climate change has been highly politicized in recent years as governments attempt to enact regulations, such as Cap & Trade and EPA endangerment findings, based on the “consensus view” that humans are causing increasing levels of carbon dioxide, and that these high levels will create dramatic changes in temperature and climate.

  • Under Cap & Trade, Pennsylvania’s economy be among the worst hit, because nearly 50% of the state’s energy comes from coal.
  • The Heritage Foundation estimated the Commonwealth would lose 46,762 jobs between 2012 and 2035, and electricity costs would increase $608 per household, if the Waxman-Markey bill were approved.
  • The release of embarrassingly candid emails from the Climate Research Unit (CRU) of the University of East Anglia has intensified, if not vindicated, suspicions that scientific misconduct has played a significant role in fueling alarmism over supposed catastrophic manmade global warming.

While some policy proposals directed at addressing climate change are well-intended efforts to protect our natural resources, others are pushed by special interests who profit from mandates, regulations on their competitors, and carbon trading.

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