Saturday, December 20, 2014

Pa. reaps natural-gas benefits

The year was 1859. The scene was a small Pennsylvania town called Titusville. What happened there changed the world forever, and for the better.

Oil - the natural resource that has driven global economic growth and heightened living standards around the world - was first discovered in Crawford County, 100 miles north of Pittsburgh.

That's where Pennsylvania's oil and natural-gas industry first took root, and for 155 years, this development has helped maintain our commonwealth's position as the Keystone State.

Today, thanks to advancements in technology over the past two decades - principally horizontal drilling coupled with decades-old hydraulic fracturing practices - Pennsylvania, through shale development, is well-positioned to remain a magnet for job creation, manufacturing, and economic opportunity.

Not only is the commonwealth back on the map as a global energy leader, but every single Pennsylvanian is benefiting from the responsible development of our region's abundant, clean-burning natural-gas resources.

From the refineries in South Philadelphia, to PGW, to Peco customers who are seeing more stable energy costs (down 40 percent since 2008, according to the Pennsylvania Public Utility Commission), to a drilling-rig manufacturer based in West Chester - the commonwealth is experiencing economic, manufacturing, environmental, and national-security benefits that are as positive as they are far-reaching.

While some politicians, activist organizations, and editorial pages want to ban natural-gas development and/or levy new job-crushing energy taxes that will harm landowners and small businesses, missing from this conversation is a fundamental understanding of economics and a realization of just how much Pennsylvania is already reaping from this generational opportunity.

Consider this: Natural-gas development in Pennsylvania has generated more than $2.7 billion in state and local tax revenue over the past few years. To most Pennsylvanians, that's a considerable sum, especially given that these investments came during one of the deepest and most painful economic downturns in our nation's history.

Yet, when one adds the more than $1 billion invested in road and infrastructure repairs, the millions in well permitting fees paid to the Department of Environmental Protection, and the more than $50 billion in capital investment, only then can one fully appreciate the magnitude of the investments being made across Pennsylvania to safely develop this energy resource.

Additionally, as a result of this development, rural communities that have been economically depressed for decades are witnessing a rebirth; more than 240,000 Pennsylvanians are employed along the growing natural-gas supply chain; and our nation's carbon-dioxide emissions are at their lowest levels in 20 years.

Those who are championing new energy taxes point to West Virginia as a model that Pennsylvania should follow. How does West Virginia compare with Pennsylvania, and is its path the one that we should follow?

Pennsylvania continues to far outpace West Virginia as it relates to natural-gas production, drilling activity, tax revenues generated, and energy jobs created. Put simply, following West Virginia's lead would result in fewer rigs and jobs, less production, and yes, possibly less tax revenue. Tax policy in Pennsylvania should be informed by economic realities, not by sound bites and talking points.

Another point that supporters of higher energy taxes often make is that "the gas isn't going anywhere" - suggesting, quite wrongly, that new and higher taxes wouldn't impact development, jobs, and investments.

These claims may be politically expedient - although Pennsylvanians overwhelmingly support more jobs over new energy taxes - but in the real economy, taxes do impact business decisions and the allocation of capital.

While the Marcellus Shale is the largest natural-gas field in the United States, it's one of many shale formations across the country and around the world that compete for capital investment.

By increasing the cost of doing business in one formation, some rigs - and the associated jobs and supply-chain benefits that come in the form of small-business opportunities for Pennsylvanians - will move elsewhere to a more competitive environment. We saw this following the implementation of the 2012 impact-fee tax, as rigs left Pennsylvania at alarming rates, and will surely see it again if a new energy tax were to be layered on top of that.

History - in this case, quite recent history - teaches us lessons. We all, especially policymakers, have a responsibility to learn from these lessons.

In 2008, Pennsylvania produced enough natural gas to meet a quarter of the commonwealth's demand. Today, the Marcellus Shale is producing 20 percent of America's natural-gas demand.

As Pennsylvania's shale production increases, changing global energy markets in the process, one thing is clear: Pennsylvania energy will continue to create good jobs and enormous shared benefits for decades if policymakers chose to harness - rather than discourage - these opportunities.


Dave Spigelmyer is president of the Marcellus Shale Coalition, a natural-gas industry trade association based in Pittsburgh.

David Spigelmyer
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