Shale Gas Turning Pa. Around, Conference Finds

BY DENISE FUREY/ The Marcellus Shale Coalition held its fourth annual “Shale Gas Insight” conference at the David L. Lawrence Convention Center in Pittsburgh last week. The first three annual conferences were held in Philadelphia. Subsequent Shale Gas Insight conferences will alternate between the two cities, with next year’s convention scheduled to be in Philadelphia.

This year’s conference included over 30 presentations or panel discussions that for the most part revolved around three themes.

First, Gov. Tom Corbett and others not only discussed the importance of the shale-gas sector to the Commonwealth’s economy today, but the opportunity to make Pennsylvania a premier energy hub.

Second, presenters stressed the need to hit the right balance in regulating the sector.

Third, former Governor and Homeland Security Secretary Tom Ridge and others discussed not only how development of shale gas and oil would strengthen our national security through reduced reliance on energy from some of the more-troubled parts of the world, but also the need to adequately protect our energy infrastructure from attack.

Approximately150 speakers and panelists addressed conference attendees. In addition to hearing from Corbett and Ridge, former Gov. Bill Richardson of New Mexico and Rich Fitzgerald, the Allegheny Co. Executive, addressed the crowd of over 600. A few nationally renowned journalists spoke, including former White House Press Secretary Dana Perino, Fox News commentator Sean Hannity and Wall Street Journal editorial writer Stephen Moore. Moore is currently the chief economist of the Heritage Foundation.

SHALE GAS drilling is transforming Penna.’s economy, Marcellus Coalition presenters reported.

The development of shale gas has had a profound effect upon Pennsylvania’s economy. Gov. Corbett noted, “an estimated 240,000 [people] can attribute their jobs to the oil and gas industry” in Pennsylvania. Hannity stated the shale-gas jobs pay far better than jobs in other sectors. The American Petroleum Institute earlier this year reported natural-gas-sector jobs in Pennsylvania pay on average $78,898 while the median salary for workers the state is $48,785.

A common complaint a few years ago was that much of the increased employment in the sector was owing to workers brought in from other states. Initially the oil and gas companies coming into the state needed to bring outside workers, as Pennsylvania did not have people with the needed skills. However, a number of companies wanting to have a local workforce partnered with Penn State to produce more petroleum engineers. Companies like Cabot Oil & Gas Corp. and General Electric Corp. partnered with junior colleges such as Lackawanna College to train much-needed high-skilled, blue-collar workers.

The impact of the shale-gas boom is being felt in Philadelphia although there are no shale-gas reserves near the city. The shale-gas boom caused a marked decrease in natural-gas prices, resulting in not only low heating costs, but also lower electric rates.

However, reducing Philadelphia area consumers’ energy bills was only the beginning. Two Philadelphia-area refineries were revitalized because of their proximity to low-cost shale gas.

Shortly after the conference ended, Ridge held a press conference at the Heinz History Center announcing the formation of Our Energy Moment, a 501(c)4 that will be fostering the development of liquefied natural-gas export facilities. The Philadelphia region would be ideal for such facilities, given its proximity to shale gas and the Delaware River.

The challenge for both LNG-export activities and increasing chemical production is getting the natural gas here through expanding current and adding new pipelines. Terranova noted political and regulatory issues could impact pipeline expansion.

Peter Terranova of UGI Energy Services and Sarah Battisti of the Bravo Group were part of a panel discussion “Getting Gas to Markets Across Pennsylvania: Opportunities & Challenges.” Battisti also is the president of the Pennsylvania Chemical Industry Council. She noted Pennsylvania is the “10^th largest chemical state in the US.” As natural gas is the major feedstock for many chemicals, there is no reason why we cannot see expansion in this industry in and around Philadelphia.

Corbett and many speakers noted less-than-constructive regulation is a barrier to the economic development of shale gas. Corbett stated his goal (from a regulatory perspective) is to create a “level playing field.”

This year, much of the “regulatory” conversation was on taxes. In past years the conference focused on environmental regulation where the industry spent a lot of time disputing assertions that hydraulic fracturing was the culprit of widespread and uncontrolled pollution. There remain opponents to FH but the hue and cry has diminished. In prior years there were numerous demonstrators outside the conference. This year the only protestors I noticed were on the last day of the conference, and I believe they were there more to protest the gubernatorial candidate Tom Corbett than HF. Corbett’s Democratic challenger York County businessman, Tom Wolfe, is far more interested in taxing shale gas than banning it. Wolf wants to impose an excise tax of 5% on gross proceeds from extracted natural gas. Wolf claims we are the only major natural-gas-producing state that does not have an excise tax. However, opponents of an excise tax, including Corbett, have noted the industry is already assessed impact fees to reimburse municipalities and the State for expenses relating to the escalating activities of the oil and gas companies. In 2013, Pennsylvania collected $255 million in impact fees. Furthermore, Pennsylvania has the one of the highest state corporate-tax rates in the country at 9.9%. Conversely, Texas does not have a corporate-income tax but rather franchise taxes that do not usually add up to more than an effective income tax rate of 2.72%. Oklahoma’s corporate tax rate is 6.0%.

Corbett and others fear that a high excise tax will kill the goose that is laying the golden eggs. Proponents of a high excise tax believe the oil and gas companies are not paying their fair share, and that those companies are already here in Pennsylvania and will not leave. It is true that the companies will continue to operate existing wells. However, if we make Pennsylvania less competitive than other natural-gas-producing states, new development will go elsewhere. XTO Energy Inc. President Randy Cleveland said Pennsylvania has currently has an “uncompetitive tax structure overall.”

Richardson believes increasing US oil and gas production is important given the geopolitical role it could play overseas with “worsening situations in the Middle East and a dour outlook for energy markets in Asia and Europe.”

Ridge agreed, but also spoke at length on the importance of protecting our energy infrastructure from sabotage. He believes we are vulnerable not only from a physical attack on electric, natural-gas and oil facilities, but also from cyber attacks. As we are reliant on electricity for almost everything we do, an attack on our grid systems could derail our economy for months.

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