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Ed Rendell’s Frack Attack

2:22 pm in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Former Governor Ed Rendell got into some hot water last week with an op-ed in the New York Daily News touting the economic benefits of hydrofracking. ProPublica quickly outed the Governor for his ties to the drilling industry, and Rendell owned up to the fact that he is a consultant to Element Partners, which has investments in the gas industry. The Daily News has added a note to its web site disclosing the financial arrangement.

Rendell’s piece touts the industry’s economic benefits, repeating the claims of an IHS/U.S. Chamber of Commerce analysis that the Pennsylvania Budget and Policy Center critiqued back in December for overstating the employment and tax benefits of shale.

The natural gas industry in Pennsylvania is like a new baby: it’s tiny but gets all the attention. Through a coordinated and well-financed public relations effort (remember My Range Resources?) and a legion of lobbyists, the industry has given an impression of its importance that just doesn’t square with the facts.

In 2012, the natural gas industry provided one-half of one percent of all jobs in Pennsylvania. The IHS report claims the industry contributed $900 million in state and local corporate tax revenue, one-third of all corporate taxes collected by the state in 2012, but the Department of Revenue puts the number at less than one-fifth of that amount (see Table 2).

Don Gilliland of The Patriot-News made a similar point in a column after a Chamber of Commerce event in Harrisburg in July, announcing a multi-million dollar “Shale Works for Us” public relations campaign. Gilliland ripped into the industry for stating — in a promotional effort the sponsors claimed was designed to “get out the facts” — that shale created 140,000 jobs in 2010 alone, while the Pennsylvania Department of Labor and Industry reported just 23,618 shale jobs since 2008. (The Chamber numbers came from the infamous “Penn State” study that Penn State subsequently disowned — see here and here).

So why does this matter? The industry cleverly uses this economic promise to beat back regulation or any other attempt to limit or manage natural gas development. Gilliland cleverly gets the chamber spokeswoman Karen Harbert on record about its strategy, to use its PR effort to “ensure no hindrance or regulatory barriers” to natural gas drillers.

Rendell urges New York Governor Andrew Cuomo to seize the opportunity that gas drilling provides, but Cuomo should use Pennsylvania as a cautionary tale rather than a guide. The economic benefits of gas development in Pennsylvania have been routinely overstated, while its costs have been minimized or ignored. The hype has only served to undermine reasonable environmental and land use restrictions necessary to blunt the short-term impacts and limit long-term harm.

News Flash! Marcellus Shale Coalition Takes on Pennsylvania Charities

10:57 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

No Fracking Signs at a protest

Image: CREDO.Fracking / Flickr

Thanks to Citizens United, we are all the beneficiaries of unlimited corporate money in our elections — witness the onslaught of TV ads interrupting our ballgames and the fall lineup of TV shows.

In a new twist, the very groups that agitated to spend unlimited funds to promote their point of view are now critical of others who challenge them. What brings this to mind is an Associated Press story this morning that the Marcellus Shale Coalition is not happy about the funding priorities of the Heinz Endowments and William Penn Foundation.

Citizens groups and nonprofits around the nation are asking questions about environmental and health impacts of natural gas hydraulic fracturing, or fracking, and Pennsylvania charities are funding much of the debate.

Foundations from Philadelphia to Pittsburgh have provided more than $19 million for gas-drilling-related grants since 2009, according to an Associated Press review of charity data. The money has paid for scientific studies, films, radio programs, websites and even trout fishing groups that monitor water quality.

That’s led to expressions of gratitude from those who say state and federal governments aren’t doing enough on the issue but also protests from some in the gas-drilling industry, who claim there’s bias in the campaigns…

But the Marcellus Shale Coalition, a leading industry group, criticized what it sees as a “record of bankrolling organizations and institutions opposed to the safe development of job-creating American natural gas.”

(Full disclosure: the Keystone Research Center receives funding from the William Penn Foundation and Heinz Endowments.)

What the groups, and their funders, are critical of is the unsafe development of natural gas. Since Pennsylvania’s official Marcellus policy is drill baby drill, somebody has to do the due diligence, so thank your local charity.

A related story provides heartening news that public debate can smoke out research that is simply advancing the perspective of the group that paid for the study.

A natural-gas driller’s group has canceled a Pennsylvania State University study of hydraulic fracturing after some faculty members balked at the project that had drawn criticism for being slanted toward industry.

The Marcellus Shale Coalition, which paid more than $146,000 for three previous studies, ended this year’s report after work had started, said Kathryn Klaber, coalition president.

The earlier studies were co-written by former Penn State professor Tim Considine, an economist now at the University of Wyoming who has produced research on economic and energy issues under contract to trade associations. The first study, in 2009, initially failed to disclose its industry funding and was used by lawmakers to kill a state tax on gas drillers. It was characterized as advocacy for producers by groups such as the nonprofit Pennsylvania Budget and Policy Center in Harrisburg…

The Marcellus Shale Coalition, a Pittsburgh-based drillers group, paid Penn State for the three economic-impact studies beginning in 2009, according to John Hanold, senior associate director of Penn State’s Office of Sponsored Programs…

Subsequent studies by other researchers have found that gas drilling created fewer than half the jobs projected by Considine in 2009.

The public needs reliable data to understand what drilling does and what it doesn’t do — information that the industry just won’t provide. Rational, independent studies funded by an unbiased government or private foundations, are in this post-Citizens United environment the antidote to unlimited, year-round campaign commercials, like the ones offered by our friends in the gas industry.

Pa. Marcellus Shale Fee Among the Lowest in the Nation

8:42 am in Uncategorized by ThirdandState

Low Low Prices! (photo: barkdog/flickr)

Low Low Prices! (photo: barkdog/flickr)

A blog post by Michael Wood, originally published at Third and State.

Lost amidst our work this week on Governor Corbett’s 2012-13 budget was the state Legislature’s passage of a Marcellus Shale package that will give Pennsylvania one of the lowest drilling tax or fee rates in the nation. The bill is now awaiting the Governor’s signatures.

As The New York Times wrote this week:

Critics, among them some municipalities and environmental groups, said the bill was a capitulation to the energy industry and would all but eliminate their ability to decide where gas development could happen. The measure would limit it in densely populated urban areas but not in suburban spaces, critics said. They also said the environmental and safety standards, like the requirement that wells be at least 500 feet from any house, were weak.

The Times also cited our estimates that “at the current price of natural gas, the fee would amount to an effective tax rate of 2.6 percent, far less than the 5.4 percent in Texas.”

The fee sets a 15-year rate schedule for Marcellus wells that rises and falls based on the price of natural gas and inflation. The Associated Press made the point, again citing our work, that this is much lower than drillers pay in other states:

At the current price of gas, the 15-year fee total would be $240,000 per well, not counting inflation, according to a summary distributed to House Democrats. The maximum per-well fee a company would pay is $355,000, if gas stays above $6, while the minimum would be $190,000, if gas stays below $2.25, again not including inflation

But the fee at any price would be well below the average lifetime per-well tax paid in other natural gas states, including $993,700 in West Virginia, $878,500 in Texas and $555,700 in Arkansas, according to the Harrisburg-based Pennsylvania Budget and Policy Center …

As far as distribution of the revenue, The Philadelphia Inquirer explains: Read the rest of this entry →

PA Must Reads: Hard Times, Unemployment Insurance and Marcellus Arm Twisting

10:18 am in Uncategorized by ThirdandState

(photo: wisaflcio/flickr)

(photo: wisaflcio/flickr)

A blog post by Mark Price, originally published at Third and State.

Although the economy is recovering, it is important to remember that unemployment remains high and that means many households are struggling to make ends meet. WITF this morning reports on non-food aid from a Central Pennsylvania charity.

NPR’s Morning Edition had a very good story on the national controversy surrounding food assistance.

Meanwhile, the Allentown Morning Call reports that a bill required to enable 17,000 Pennsylvania workers to qualify for federally-funded unemployment insurance has cleared an important hurdle.

The state House has advanced Legislation that would restart the flow of extended unemployment benefits for 17,000 jobless Pennsylvanians. A final vote, which would send it to Gov. Tom Corbett’s desk, is expected Wednesday …

… the bill was quickly moved to third, and final consideration, with Speaker Sam Smith’s announcement that all amendments to the bill had been pulled. …

Some House Republicans, with the backing of business leaders, had sought to tie approval of the bill to shoring up the long-term solvency of a system that owes $3 billion to Washington — courtesy of historic levels of unemployment.

The Philadelphia Inquirer reports on hard ball politics aimed at boosting support for a weak Marcellus Shale drilling fee. Read the rest of this entry →

PA Must Reads: Asset Tests, Layoffs and The Race To Give Away Tax Dollars To Big Oil

2:00 pm in Uncategorized by ThirdandState

Oil Ram

Oil Ram (photo: kqedquest, flickr)

A blog post by Mark Price, originally published at Third and State.

On Wednesday, the Pennsylvania Department of Public Welfare submitted its final proposal to the federal Food and Nutrition Service for an asset test on SNAP benefits (formerly known as food stamps).

As the Department explains in its proposal:

The Department of Public Welfare has submitted its final plan to the Food and Nutrition Service (FNS) to reinstate the asset test for the Supplemental Nutritional Assistance Program (SNAP). The final proposal sets the limits at $5,500 for households (age 59 and under) and $9,000 for households with older Pennsylvanians (age 60 and above) or disabled individuals…The SNAP program takes into account both income and assets when determining an individual or family’s eligibility. Certain assets are exempt from the measurement, including but not limited to one’s home, primary vehicle, educational savings accounts and pension plans.

We are pleased the thresholds have been adjusted up to account for inflation but remain deeply skeptical of the efficacy of the proposed asset test. Asset tests are costly to administer and discourage families from saving. It is counterproductive to force low-income families who have suffered a job loss because of the economy or a major illness to spend down their assets in order to qualify for food assistance. This policy is especially harmful in today’s economy with unemployment still high.

To understand just how ill prepared families are for an unexpected job loss or major illness, the Corporation for Enterprise Development (CFED) has developed an Asset and Opportunity Score Card. One of the measures in the Score Card is the liquid asset poverty rate:

Percentage of households without sufficient liquid assets to subsist at the poverty level for three months in the absence of income, 2009. The threshold used to determine the liquid asset poverty rate varies by family size. A family of three with liquid assets less than $4,632 in 2011 is asset poor.

According to CFED, 36% of Pennsylvania families are liquid asset poor. CFED has more on the problems with asset testing here. Read the rest of this entry →

Pa. Loses $300 Million to Gas Drilling Tax Impasse

1:44 pm in Uncategorized by ThirdandState

A blog post by Chris Lilienthal, originally published at Third and State.

Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center.

Our Drilling Tax Ticker tracks the revenue Pennsylvania has lost since October 1, 2009 by not having a tax in place. It shot past $300 million Monday morning.

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

Plus, the $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years.

$24 billion? Yes. Reuters calculated that at current gas prices a Pennsylvania shale well would generate $2.4 million over 20 years under a tax comparable to West Virginia’s. By comparison, an impact fee approved by the state Senate would generate only $360,000 over that 20-year period.

Based on an industry estimate that Pennsylvania will have 11,500 wells operating by 2020, Reuters determined that Pennsylvania will lose at least $24 billion in gas revenues over 20 years – and much more if natural gas prices rise.

Keep in mind that across the country, 98% of natural gas is produced in states that have drilling taxes or fees. In many energy-producing states, that revenue supports services like education and health care, funds environmental conservation and protection, and mitigates the impact of drilling on local communities.

As Reuters put it:

Given the fiscal challenges of Pennsylvania, it would seem important to earn as much revenue as possible for the state’s natural resources. Maybe it’s time for the Pennsylvania General Assembly to revisit the issue and really determine how much impact this fee will have.

No PA Marcellus Shale Fee for 2011

2:03 pm in Uncategorized by ThirdandState

A blog post by Michael Wood, originally published at Third and State.

Another year has nearly come and go, and still Pennsylvania has no Marcellus Shale drilling tax or fee.

To refresh your memory, the state House and Senate seem to be engaged in a game of how low can you go with their competing shale plans.

Last month, the House approved HB 1950, taking Governor Tom Corbett’s approach to a drilling impact fee. It would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate.

The Senate, meanwhile, adopted SB 1100, sponsored by Senator Joseph Scarnati, raising $360,000 over the life of an average well, the equivalent of 2.2%.

A comparable well in Texas would raise $878,500 — five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100. Even an industry-supported drilling tax proposal from August 2010 would collect more than these plans.

Under both the House and Senate bills, drillers will pay less in Pennsylvania than they do in Arkansas, Texas, Wyoming and many other energy-rich states.

Now fast forward to this week. On Wednesday, the Senate amended the Scarnati plan into HB 1950 and sent it back to the House before adjourning for the rest of 2011.

Why kick the ball back to the House? StateImpactPA explains:

The move was aimed at setting up a joint conference committee, which will be formed if the lower chamber votes ‘no’ on the legislation. A committee would streamline the final voting process, if and when House and Senate leaders agree on a compromise between their two fee bills.

As StateImpactPA observes, 2011 seems to be going the way of 2010 and 2009 — “the year will come and go without a comprehensive Marcellus Shale bill being signed into law.”

PA Must Reads: Marcellus Shale Gas Pipes and Leases

8:52 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

This morning, The Philadelphia Inquirer published the second in a four-part series on safety issues surrounding natural gas pipelines.

When the owners of the Tennessee natural gas pipeline decided to expand the pipe in the Marcellus Shale region of Pennsylvania’s northern tier, the federal safety rules they had to follow filled a book.

For this interstate transmission line running north from the Gulf Coast, the regulations covered everything from the strength of the steel to the welding methods to how deep the pipeline must be buried.

Also in Bradford County, another company – Chesapeake Energy – is building a pipeline the same size as the Tennessee line, 24 inches in diameter. And it’s designed to operate at even higher pressure – up to 1,440 pounds per square inch.

But for this line, in this rural section of shale country, there are no safety rules at all.

The Times-Tribune in Scranton reports that Marcellus gas drillers have to disclose to the Securities and Exchange Commission the potential safety hazards of drilling but not to people being asked to sign leases for drilling on their own property. Read the rest of this entry →

A $56 Million ‘Oops’: PA Revenue Department Updates Marcellus Shale Tax Estimates

1:01 pm in Uncategorized by ThirdandState

A blog post by Michael Wood, originally published at Third and State.

Tim Puko at the Pittsburgh Tribune-Review uncovered a $56 million mistake in the Pennsylvania Department of Revenue’s reporting of personal income tax (PIT) collections attributed to Marcellus Shale drilling for last year.

Back in May, the Department estimated that taxable Marcellus Shale royalties generated $102.7 million in PIT collections in 2010. Now the Department says that figure is a tad lower — $46.2 million, a decrease of $56.5 million or over 55% from what was reported six months ago. To quote Britney Spears, “Oops!”

How does this happen? By rushing too fast and using incomplete data to make a policy point, as I noted in the Tribune-Review story. This type of cheerleading report for a single industry is highly unusual for the Department of Revenue. There isn’t a report of taxes paid by snack food manufacturers, steel producers, or even dairy farms.

The updated Marcellus tax data included another interesting tidbit — how little is paid in PIT from income flowing through to oil and gas company owners. In 2009, the Department reports $9.9 million in PIT from these taxpayers.

Our review of oil and gas drillers in Pennsylvania found that more than 70% of the companies were structured as limited liability companies (LLCs) or some other type of flow-through entity. The owners of these companies are likely a combination of corporate and individual owners, but getting less than $10 million from the individual owners of a booming industry is pretty eye opening to how little drillers are taxed in Pennsylvania.

The gas industry has been very effective in arguing that it is contributing a “game-changing” number of new jobs and tax revenue, and uses these claims to beat back efforts to enact a meaningful drilling tax. We have made the case for some time that these claims are well overstated. The Department of Revenue data, particularly the paltry PIT numbers for 2010, seem to back up our case. Read the rest of this entry →

It Is an Undeniable Fact that I Am an Uber Responsible Private-Sector Labor Market Analysis Machine

2:41 pm in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

A while back the Pennsylvania Department of Labor and Industry released a new version of its Marcellus Shale Fast Facts, which prompted a statement from Kathryn Klaber of the Marcellus Shale Coalition (MSC):

This new data further reinforces the undeniable fact that responsible American natural gas production is an unmatched private sector job creation machine.

So let’s take a look at what the numbers say. Figure 1 presents on the left axis total employment in the Marcellus core industries by quarter from the fourth quarter of 2007 to first quarter of 2011 (the most recent data available).

On the right axis, the percent change from the previous quarter in total employment in that sector (the red line).

On a quarterly basis, employment growth in this sector is volatile, ranging from negative 5% in the first quarter of 2009 to an increase of more than 20% in the second quarter of 2010.

Between the first quarter of 2010 and the first quarter of 2011, the Marcellus core created 7,328 jobs. Total nonfarm employment over the same period increased by just over 87,000 jobs.

Figure 2 presents similar data for what Labor and Industry defines as Marcellus ancillary, industries where some employment might be affected by Marcellus drilling. There is much less growth in the Marcellus ancillary data and, in particular, growth is consistently negative in the first quarter of each year. This is a tell-tale sign of significant seasonality in the data. So data users will want to be careful not to compare different quarters when trying to evaluate the pace of growth in the Marcellus ancillary industries.

With the Labor and Industry release, we also got a new round of the new hire numbers (xls):

  • There were 379 additional new hires (a 22% increase) in the Marcellus core industries between the second quarter of 2010 and the second quarter of 2011.
  • In the Marcellus ancillary industries, there were 1,980 additional new hires (a 14% increase).

To put these numbers in context:

  • New hires in all industries increased by 43,100 (or 8%) over the same period;
  • Transportation, Warehouses & Utilities gained 4,200 (a 17.8% increase);
  • Administration & Waste Services, a sector that includes temporary agencies, added 23,300 new hires (a 24.3% increase);
  • Arts, Entertainment & Recreation added 3,700 new hires (a 15.2% increase).

In a future post, I will present what we know about county-level employment trends.