Welcome light on shale gas from Colorado

Welcome light on shale gas from Colorado

Intelligent discourse is a wonderful thing. Unfortunately, it’s a rare commodity in our cyber commentary age. Incendiary heat with little or no illuminating light is par for the course.

Thus, it is most encouraging when this institute receives educated and enlightening responses to its policy briefs and its commentaries based on those scholarly briefs.

A good example can be found at Townhall.com. That’s where a commentary on Gov. Tom Wolf’s latest proposal to impose a severance tax on Pennsylvania shale gas production (“Shale taxers disregard Bastiat’s lesson,” based on AI Policy Brief Vol. 17, No. 10, authored by Frank Gamrat and Jake Haulk), elicited the below response from Colorado. It is truncated at some points and/or otherwise edited for brevity and clarity:

“I was working in the Marcellus (shale play) until the bust hit me in 2015, so I just want to add a few points. I’ve worked in nearly 20 states — all the time zones in the lower 48 — so my experience with regulations and taxation is more diverse than many,” the writer noted.

“Pennsylvania had a fairly strict regulatory climate compared to many areas, but in light of the density of the population, the overly protective nature made sense. After Gov. Tom Wolf was elected, the regulatory climate grew hostile. I had an inspector threaten to shut down our drilling operation for, no exaggeration, a shovel full of drill cuttings (no hazardous chemicals, just dirt basically) on a wooden mat within thick environmental containment barriers. We prided our rig on the high level of environmental compliance we operated under.

“In spite of this hostility, on which Wolf ran for governor, the company I worked for was willing to bend even further backwards to please inspectors, no matter how unreasonable the demands.

Continued the commentator:

“Regarding the Marcellus (shale play), in 2014 it surpassed the Gulf of Mexico as the largest gas-producing region in the United States. The most productive and profitable areas of the Marcellus are under Pennsylvania, with other states on the outer fringes. Even with added costs, the region economically produces incredible volumes of gas in the middle of the most populous areas of the U.S.”

Further, proffered the enlightening writer:

“There are not enough pipelines to transport all of the gas the region produces, but that is improving every month. Because of the industrial capability of the region, one of the world’s largest ethane crackers is being built (in Beaver County) to provide the chemical feed stock that natural gas provides for manufacturing plastics, olefins (for clothing, etc.) and other industries. The investment in the area is massive.

“Unlike high-cost drilling natural gas in Western Colorado, which was killed by a hostile regulatory climate introduced by then-Gov.(Bill) Ritter, the power of the Marcellus will absorb the extra costs, and regional natural gas costs will be driven higher (exactly what you point out in your article as the subtle impact).”

Then, this most salient point:

“The natural gas company won’t be paying the (severance/extraction) taxes, but will act as a pass-through agent for the state, collecting those taxes from consumers and paying those taxes to the state. The optics make it appear that the “evil” gas companies are being punished when, in fact, everyone pays, and the economically challenged pay more for less.

“The Marcellus (shale play) is the No. 1 gas province in the U.S.; the Piceance in Western Colorado is the No. 2 province, in terms of reserves. The cost of regulations has brought the Piceance to a total of five working drill rigs from a high of 149 rigs before the regulations.”

“It is also probably worth noting that the state of Pennsylvania published several years ago that the economic impact of a working drill rig was over 250 direct (on the rig) and indirect (store clerks, hotels, teachers, etc.) jobs.”

Concluded the townhall.com correspondent:

“While I was traveling from Colorado to work, most of the people I worked with were from the region. If companies choose to drill at reduced rates because of the increased costs and hostile business climate, fewer jobs will be created and maintained. In the long run, production jobs that continue for decades after the brief drilling period will be fewer in number.

“Great article,” the writer closed. Great commentary, Mr. Writer.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).