Golden Age of Gas

Member Group : Lincoln Institute

There is no doubt that development of Pennsylvania’s Marcellus Shale natural gas resources has fueled an economic boom across a wide swath of Pennsylvania, a region that has floundered economically for decades. But, the impact of Marcellus is being felt not only in those communities, but across Penn’s Woods and – as recent events illustrate – could actually play a global role.

After much debate, the General Assembly passed a tax – deceptively called an "impact fee" – on Marcellus gas drillers. The tax has resulted in over $206 million in revenue to date. Ultimately 58 companies have been singled out and are required to pay the additional tax above and beyond the taxes all other businesses in the state are required to pay. Although taxing a business just because it is successful is poor public policy, many local communities will benefit from the revenue. The amount of tax payments exceeded initial projections attesting to the vibrancy of the Marcellus gas industry.

Already substantial, the economic impact of Marcellus gas is only just beginning to be felt. Speaking recently at an industry conference in Philadelphia, Governor Tom Corbett dubbed what has happened so far as the "tip of the spear" which will spark a new industrial revolution in Pennsylvania. This was not rhetorical hyperbole. Already the Shell Chemical Company is moving toward development of an ethane "cracker" plant in Beaver County that the Pennsylvania Economy League estimates could create 8,000 new jobs and have a $4.8 billion impact on the state’s economy.

Manufacturing in Pennsylvania has fallen on hard times in recent decades. In fact, more people are now employed by government than hold jobs in manufacturing. The creation of 8,000 new jobs in the energy industry is indeed a game changer. As XTO Energy President Jack Williams recently observed this "golden age of gas" is indeed reviving the state’s manufacturing sector.

In addition to the domestic benefits of Marcellus gas development, the shale reserve could play an important international energy policy role. Recent developments in the Mid-East have underscored the fragility of America’s dependence of oil from that region. The September 11th terrorist attack that killed the U.S. Ambassador to Libya and the widespread demonstrations purportedly spawned by a movie trailer denigrating the Muslim prophet Muhammad revealed a cultural fault line that has opened a worldwide debate over freedom of speech that threatens to further destabilize the region. Add to that the expanding influence of Iran and growing crisis over that nation acquiring nuclear weapons capabilities and the threats to the world’s oil supplies are growing greater by the day.

It has become abundantly clear the United States must significantly reduce its dependence on oil from the Mid-East. To do that America must more rapidly develop domestic energy production; and a multi-faceted approach is required. We must speed up the tapping of our abundant natural gas, coal and oil resources. Construction of the Keystone KL pipeline, issuance of more off-shore oil drilling permits and responsible drilling in the Artic Natural Wildlife Refuge are keys to oil development. The Obama Administration’s "war on coal" must be ended and the industry re-incentivized to spur development. And, of course, we must foster policies that encourage, not discourage the further development of our natural gas resources.

There also is a role for so-called "renewables" in America’s energy self-sufficiency equation. But, wind, solar and tidal power has yet to reach a technological point where they are economically feasible. That doesn’t mean we shouldn’t continue working toward that end, it is just prudent to view those energy sources a long-term rather than near-term solution.

Despite the overwhelming economic and strategic benefits of the Marcellus gas industry in Pennsylvania challenges remain. Radical environmentalists seek to stop further drilling rather than to advocate for reasonable safeguards. Misinformation about fracking and other aspects of shale development runs rampant. And, as always, there are elected officials who see a goose laying golden eggs they want to take to finance unrelated politically popular programs.

For state government the challenge going forward is to not get in the way. Lawmakers must avoid the temptation to overtax, and the administration must resist calls for over-regulation. So far, a relatively reasonable balance has been struck. A lot is riding on keeping it that way.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)

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