The shale correction, TIFs & those Steelers
There can be no denying that its correction time for the shale gas industry. And how public policy makers react is of great import.
No greater affirmation of the industry’s challenges came this past week as one of the largest players (if not the largest shale players), EQT Corp. of Pittsburgh, announced it was laying off nearly a quarter of its workforce.
The scaling back comes in a climate of fewer drilling permits being sought in Pennsylvania last month, depressed prices and prognostications of low prices through 2024.
Further exacerbating the uncertainty are concerns of a global recession in 2020, which could tamp down prices even more.
But the pullback also comes at a time of record product being pulled out of the ground.
Thus, too much product and predictably low prices have created a tough situation. And it’s a situation that has a large ripple effect.
Royalties are down, of course, for landowners who sold their gas rights. That would include the Commonwealth of Pennsylvania, which has seen its payments cut in half, from $135 million in 2014 to $67 million last year.
And what of impact fees, at an all-time high in 2018? Industry contraction could mean less money for jurisdictions paid to, at least in theory, offset the effects of the industry on public infrastructure.
And yet many public policy makers continue to push for a severance/extraction tax (on top of the impact fee) on shale gas. What was an imprudent public policy in boom times would be a disaster in these next several years of corrections.
From around the public policy horn:
The turnaround company that purchased the struggling SouthSide Works retail complex on Pittsburgh’s South Side says it will invest up to $25 million to turn around the fortunes of the central-planned entertainment, office, retail and residential complex.
Somera Road Inc., of New York, is described in media reports as a commercial real-estate firm that targets distressed assets.
But the Pittsburgh Urban Redevelopment Authority, which shepherded this project to fruition years ago, also says it will spend at least $1 million in public dollars to upgrade the complex’s public spaces. A Somera official says that figure likely would be $2 million.
Why? Did the public not “invest” enough in this project with a pricey tax-increment financing (TIF) plan — which is never a good idea for use with notoriously fickle retail/entertainment complexes?
You might recall that the standard “argument” for employing a TIF is that “but for the TIF,” this project or that would not have been built. But if it could not be built without a TIF, it should not have been built.
After all, history has shown that the complex is not economically sustainable.
The Pittsburgh Steelers are expected to spend up to $25 million of their own money to significantly expand Heinz Field’s Great Hall merchandising store, reports the Post-Gazette. The project would necessitate the relocation of a ticket window and office area.
The Steelers long have squabbled with the facility’s owner – the city/county Sports & Exhibition Authority (SEA) – on who pays for what improvements/renovations.
But as state Sen. Wayne Fontana, who chairs the SEA board, says, it appears the Steelers’ “game plan” has changed. The franchise most recently footed the $2.5 million bill to open a pizzeria, he notes.
Taxpayers should welcome the Steelers’ newfound embrace of paying their own way. But taxpayers really would welcome the Steelers paying fair-market value for the Heinz Field and taking full responsibility for it – including the paying of property taxes.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).