Marcellus Shale Rules Should Be Fair
"Leaders in Harrisburg would be wise to avoid the temptation of crafting policy in a vacuum and instead design a fee and regulatory structure that not only provides heightened safeguards to the public, but also a competitive investment climate."
The Marcellus Shale has been, and continues to be, the source of enormous benefits for Pennsylvanians. In one year alone, the industry has provided $1.6 billion in royalties and bonus fee income to local landowners. Residents now enjoy lower energy bills, with one conservative estimate showing consumers saving a total of nearly $650 million in 2011.
Besides investing more than $400 million in roads and related infrastructure, the industry also has paid an estimated $1 billion in state and local taxes during the last five years. Even as the rest of the country’s economy struggles amid devastatingly high and lingering unemployment rates, the natural gas industry supports nearly 230,000 jobs throughout the commonwealth, according to state labor data. Key natural gas-producing counties, which have long struggled with tough economic times, are now realizing unemployment rates that are the envy of the nation.
But it’s important to realize that these contributions to Pennsylvania’s economy and workforce hinge on a rational regulatory environment. Indeed, the economic benefits provided by responsible natural gas development from shale were not preordained, and the ability to create jobs and invest in local communities will depend in no small part on the type of regulatory environment our elected leaders choose to create.
State lawmakers are considering a range of policies impacting the industry, including a proposal to create an impact fee for Marcellus development. Such a fee would provide another important source of public revenue for the communities in which natural gas development is under way, but only if it is structured in a competitive manner.
The natural gas industry — like any other industry — cannot grow amid continually increasing costs, nor can it make the proper long-term investments in new infrastructure, new jobs and new equipment if that money instead must be used to pay new taxes or higher fees. Creating an overly burdensome tax or fee — especially given market conditions and the historically low price of natural gas — could drive investment out of Pennsylvania and into more competitive states, regions or even nations, resulting in less state and local revenue, lost jobs and fewer public investments.
We’ve been down this road before. For decades, leaders in Harrisburg continually created regulatory hurdles and costly mandates for Pennsylvania’s manufacturers. While manufacturing didn’t pack up and leave wholesale, the imposition of uncompetitive policies and complex, anti-growth tax and regulatory structures forced many companies to cut investments in the commonwealth and send their money — and jobs — to other areas of the country, or even outside the United States.
When it comes to natural gas development, if Pennsylvania unnecessarily creates a hostile investment climate through a high-cost regulatory regime, operators might well decide to invest in neighboring states or other basins nationwide and the world. We’ve seen several key operators begin, in earnest, to reallocate capital from Pennsylvania to other basins.
In fact, manufacturing is an interesting example because of what Marcellus development has meant for this crucial base of our economy. After years of investing in more competitive overseas markets, chemical and manufacturing companies are now — thanks to lower gas prices spurred by in part by the Marcellus Shale — reinvesting in the U.S.
One company, Shell, also is planning to build an ethane cracker, possibly in Pennsylvania. It’s a chemical manufacturing renaissance that the American Chemistry Council projects will ultimately result in $132 billion in added economic output and is allowing companies to bring jobs back from overseas. Similar growth is being realized in steel, construction and transportation industries as well, adding new life to key sectors of our state and national economy.
For its part, the White House has underscored the critical and growing role that American natural gas development is playing in rebuilding our nation’s manufacturing base. Recently, the Obama administration noted that "the potential benefits [of shale gas] to the U.S. economy are substantial" and "will boost investment and exports in the coming years, generating new jobs."
This resurgence of manufacturing — and the hundreds of thousands of jobs it supports — would not have happened if the country had viewed the industry as nothing more than a flash-in-the-pan source of government revenue.
Leaders in Harrisburg would be wise to avoid the temptation of crafting policy in a vacuum and instead design a fee and regulatory structure that not only provides heightened safeguards to the public, but also a competitive investment climate.
The responsible development of the Marcellus Shale has been a blessing to the Pennsylvania economy, and the industry is eager to continue its investments throughout the region. We hope that our elected leaders in Harrisburg share this commitment to Pennsylvanians’ future and are equally committed to the ongoing economic rebirth that is now being ushered into our commonwealth.
Kathryn Klaber is president of the Canonsburg-based Marcellus Shale Coalition (www.MarcellusCoalition.org).