Shameful PA Budget Deal Takeaway from Working Families Giveaway to Gas Drillers

Plan would destroy state forests on altar of natural gas industry

Drilling Rig on Marcellus Shale
Drilling Rig on Marcellus Shale

The proposed budget deal announced September 11, 2009 includes a massive giveaway to huge, multi-national energy corporations that want substantial and immediate access to drill, baby, drill in our public forests and parks.

Tell your state legislators that opening up much of the state’s forest lands to gas drilling is NOT the way that Pennsylvania should solve its budget crisis.

Greedy gas companies spent more than one million dollars lobbying state government this year, and it looks like it paid off. The state budget does not include a severance tax on natural gas drilling even though it injures Pennsylvania taxpayers. To add insult to injury, the budget deal also opens up state parks and forests to gas drillers. Because gas prices have fallen, gas leasing prices have also fallen, so now giant multi-national energy corporations will be able to make a sweetheart deal to lock up leases at bargain basement prices.

If our state Department of Conservation and Natural Resources (DCNR) is forced to hold lease auctions in our state lands today, WE LOSE. This is an outrageous breech of the public trust and no way to balance the budget.

This is a taxpayer rip-off – listen to PennFuture’s President and CEO Jan Jarrett describe how so in our latest podcast

ACT NOW! Tell your legislators that you won’t stand for being cheated for the benefit of giant energy corporations; you won’t stand for the plunder of our state land by profit-hungry gas companies. And you want our treasured state lands to be protected so our children and grandchildren can enjoy them.

“This budget gives a big sweetheart deal to the multi-national gas drilling industry,” said Jan Jarrett, PennFuture’s president and CEO, “but it gives nothing to the average Pennsylvania taxpayer. Opening up more state land to drilling means all Pennsylvanians lose their access and enjoyment of unspoiled nature.

“In fact, just about everybody except the gas industry loses under this budget deal.” she continued. “Are you a smoker who wants to quit? Too bad. The state is cutting funding to help you quit, and raising the tax on your addiction that now won’t be treated. Do you like to help the local volunteer firefighters out by playing Bingo? Too bad on both sides. Bingo and other small games of chance will now be taxed, which will mean less money for the firefighters. Have a gambling problem? Thanks to the addition of table games at the state’s casinos, you’ll now have more ways to lose money. But if you’re a multi-national energy corporation, you don’t have to pay a severance tax and you get to drill on the public’s forest land.

“This deal comes after the gas drilling industry lobbyists spent more than $1 million dollars just this year to fight against a severance tax – a tax they happily pay in other states,” continued Jarrett. “So instead of paying their fair share, the industry will get sweetheart deals on drilling leases on state land.

“This is no way to balance Pennsylvania’s budget. Thoughtful legislators should vigorously oppose this deal on the grounds that it cheats Pennsylvania taxpayers,” said Jarrett.
“It’s time for our elected officials to show political courage and independence by turning down this backroom deal.”

Anatomy of a rip-off
As part of the deal to break the budget impasse, huge multi-national energy corporations want immediate and substantial access to drill in our public forests and parks, instead of paying a severance tax on natural gas drilling. A severance tax would bring in revenue every year, and by 2014 could be generating half a billion dollars for Pennsylvania’s treasury, for environmental programs, and to compensate communities dealing with the damage from drilling.

Allowing drillers widespread access to our state forests now, instead of assessing a fair severance tax would be a rip-off for taxpayers. Now is not the time to allow wholesale leasing of our state forests when drillers could pick up leases at bargain basement prices.

The budget deal will allow the energy corporations access to hundreds of thousands of acres of our forests. The budget deal anticipates leasing state land for drilling will bring in $100 million a year in lease payments and royalties. No one has seen the estimates except for the budget negotiators. To make the numbers work, either the state will be forced to open up huge amounts of land for drilling or the lease auction must bring in unrealistically high bids.

Here’s the real story. Last year the Department of Conservation and Natural Resources (DCNR) conducted an auction for leases on 74,000 acres of public land at a time when natural gas prices were at an all-time high. The winning bids averaged $2300 per acre. Today, gas prices have fallen off a cliff and now are at a seven year low. Gas drillers are now paying an average of $250 to $500 an acre for leases on the open market.

Giant energy corporations are taking advantage of the new lower prices. Seneca Energy won the right to drill on 8400 acres of state land in last year’s auction and bid an average of $3700 an acre for the lease – a total of more than $31,000,000. When gas prices started to fall, Seneca walked away from that bid, and DCNR offered the acreage to other bidders. ExxonMobil subsequently took over the lease for $9 million or just over $1000 per acre.

If DCNR is forced to hold lease auctions now, taxpayers lose. With the most optimistic estimate at $1000 per acre, the state would have to open up 100,000 acres of land for drilling. If the leases go for market rates, say $500 per acre, the state would have to open up twice that amount of land – 200,000 acres. And drillers want access to land that is unsuitable for drilling – our natural and wild areas, state parks and other sensitive areas. DCNR already has 660,000 acres under lease for gas drilling. The Department estimates that at the maximum, there are an additional 250,000 acres suitable for drilling, but agency employees warn that at that scale of drilling, the other assets of the forest – for recreation, wildlife habitat, and logging – would be permanently compromised.

This is no way to balance Pennsylvania’s budget. Thoughtful legislators should vigorously oppose this deal solely on the grounds that it cheats Pennsylvania taxpayers out of reasonable payment for the exploitation of a public resource, and it’s a sweetheart giveaway to giant energy corporations.

People who care about Pennsylvania’s beautiful state lands should oppose it to ensure our parks and forests are available to our children and grandchildren for hiking, camping, hunting and fishing.

Editorials Rip Budget with NO Severance Tax
…Market advantages for Pennsylvania-produced gas outweigh any disadvantage that the severance tax would pose for the industry. The largest national markets for natural gas are in the Northeast and most of the current gas supply must be shipped by pipeline from the Gulf region. The presence of so much gas so near its major market is a bonanza for producers…
Scranton Times-Tribune
           Citizens Voice  (Wilkes-Barre)
           Pottsville Republican-Herald

No one wants to pay taxes, but the recession has raised the need for new revenue sources. All of the 14 states with greater natural-gas production than Pennsylvania are collecting a severance tax or fee, so why not here?
Philadelphia Inquirer

Clearly the gas field is going to be developed. In addition to its abundance of gas, it is within hailing distance of the nation’s primary natural gas markets on the East Coast. Yet, the perfectly reasonable tax to enable the people of the commonwealth to share in the wealth has been tabled under the bizarre theory that it somehow might hinder development.
The Daily Review (Bradford County)The River Reporter (Narrowsburg, N.Y., with circulation in Pike and Wayne Counties)

Given the budget impasse in Harrisburg, things have not been going too well in Pennsylvania lately. Schools, senior centers, libraries and more have suffered debilitating cuts in state funds and have been forced to cut back services. Some pain is being felt across the income spectrum, but one can’t help noticing that the poorest and most vulnerable in society are taking the biggest hits. Against this background, Gov. Ed Rendell’s recent decision not to impose a severance tax on the natural gas drilling companies strikes a particularly sour note.

Rendell’s solicitude for the gas drilling corporations is touching, but before we pull out our hankies it is worth noting that the CEO of Chesapeake Appalachia, LLC, one of the major gas drilling players in the Marcellus Shale area, was the 25th most highly compensated executive in the Forbes 500 last year, taking home a little over $36 million. His five-year compensation total was $189.67 million.

PennFuture is a statewide public interest membership organization. Working from the premise, “Every environmental victory grows the economy,” PennFuture has successfully advocated for landmark environmental legislation, including passage of the largest-ever environmental funding bond, investment in green energy and energy savings programs, the Alternative Energy Portfolio Standards Act, the Clean Vehicles Program and adoption of a regulation that restricts mercury pollution from coal-fired power plants.

3 thoughts on “Shameful PA Budget Deal Takeaway from Working Families Giveaway to Gas Drillers”

  1. Dennis Rousseau, a leader of the Carpenter’s Union, ran against Marshall last time and was defeated. We are open to supporting progressives but don’t have any candidates for now.

  2. Maude Barlow and others articulately express themselves on an issue related to drilling for natural resources, water as a key asset in speeches and talks that are archived at the Alternative Radio website.

    See for example
    Alternative Radio can be heard directly in our area on WYSU at 6 am on Sundays on a one hour broadcast. At other times it can be heard on streaming audio from other stations.

    I believe they do bring up the issue of water being contaminated at times when there is drilling. Below I briefly indicate my thoughts on this picked up from working in geophysics for a couple of years decades ago.

    Fluids are often under high pressure at depths encountered in drilling for oil and gas. That’s why there used to be gusher wells. Shale in the natural state is not very permeable. It does not allow fluids, liquid or gas, to move easily.
    But drilling through shale transforms the situation increasing the shale’s permeability allowing water and other fluids to flow more easily. That the distribution and purity of water can thus be greatly altered is fairly clear, at least to me.

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