Appalachian Basin

Pennsylvania’s Natural Resources Provide for a Great Future

NOTE: This is a guest post from Trevor Walczak, vice president of the National Association of Royalty Owners, Pennsylvania Chapter. The comments and opinions expressed in here are the author’s alone, and do not necessarily reflect those of Energy In Depth.

Last week I responded to an editorial in the Pittsburgh Post-Gazette but because of length restrictions my article was unable to run in its entirety. Below is my full post responding to Dan Simpson’s, Fracking: Compromises the Future of Pennsylvania.

I am from coal country. The hard coal region of Pennsylvania. My family’s immigrant patriarchs all spent their early working years carving out a living in the mines throughout the first half of the twentieth century. While the mines were cold, dark, and dangerous, they were the means to give these new immigrant families a better life. When they had enough money saved to buy their freedom, they did.

Freedom for my dad’s family was a plot of farmland in what we now call Marcellus country, far from the colliery spoils, mine fires and acid mine drainage. As a kid traveling into town, I remember seeing those still recent scars, which were a stark contrast to the natural beauty to which I’ve grown accustomed. But that’s what those scars are for me: a reminder of the blood and sweat, paid forward, to give a better, cleaner chance at life for my young family and me.

So how do we take the lessons of the coal era and apply them to our future energy needs?

While coal and gas are both natural resources which fueled an economic transformation, a key distinction in legacy will be found in mineral ownership. Coal companies typically owned the land where they mined, while the Marcellus is owned by hundreds of thousands of Pennsylvanians who have built their lives for generations on top of its hidden treasure. These farmers, sportsmen, and conservationists have invested in their land for generations out of love for the lifestyle without knowledge of the coming energy boom.

The Marcellus has already been good to these property owners. By the spring of 2013, the Associated Press estimated that over $1.2 billion had been paid to Pennsylvania mineral owners in the form of royalties. Where I come from, this money is saving the family farms from previous foreclosure threats, keeping properties from being subdivided, saving us all from the associated effects of urban sprawl, and, overall, making a hard way of life a little easier. Royalty owners are using this money and investing it in our kids, in better farming and forestry practices, as well as into the communities through support of local businesses, and into the state, through personal income taxes. We are not seeing farms abandoned in exchange for tropical islands. I see new tractors, new roofs on barns, and charitable donations.

The Simpson editorial refers to this phenomenon as an “El Dorado of unearned wealth,” a phrase I fundamentally reject, and I believe that perversion of the debate is meant to sow envy, which only further marginalizes the minority which shares that view. Many of us have endured multi-generational financial struggles to simply hang on to our most valuable asset: our property. Out here in Marcellus country, our land often defines us and our chosen lifestyle. Unconventional shale gas reservoirs are our property. When you look out your window at those “scenic views,” remember someone actually owns them, and there’s a story behind why they exist. Our land is not just a backdrop to your commute.

Inevitably, it is the owners of the Marcellus who are on the front lines of energy independence. This development is taking place on our land, and I have yet to meet anyone who will stand complicit with any practices which jeopardize their family’s safety or that of the greater community. Your attempt to equate environmental destruction with all shale drilling is unfounded. According to DEP, Pennsylvania’s unconventional gas well count stands at 9,550. If environmental degradation was inevitable for each gas well drilled, as asserted, we’d see that after over 7 years of Marcellus Shale development. No one wants to see anyone’s water supply damaged and I expect to see the industry’s environmental record continue to improve from the early exploration, but the numbers prove your fear mongering is over-stated.

As royalty owners, we feel a strong, well-funded regulatory body to oversee the drilling operations will protect all citizens of the Commonwealth. The Act 13 Impact Fee increased yearly funds to DEP by $6,000,000 and an additional yearly allocation of $7,500,000 to County Conservation Districts to assist in site inspections. If the regulatory framework surrounding gas development is in need of additional funding, the proper course of action is to amend Act 13 to increase these defined allocations. The course of action should not be to repeal Act 13 along with its more stringent environmental regulations which have increased a drilling company’s presumed liability for water contamination by 250%.

In growing numbers, the “frackers,” as you call them, are also from inside our communities. The pride I see them take in protecting their hometowns is a key component to safeguarding the development as well. We need to recognize industry leaders like Cabot Oil and Gas who have invested heavily in education inside of the communities they operate in. In April of 2014, they announced a $2.5 million gift to Lackawanna College’s School of Petroleum & Natural Gas. This is a massive investment in our kids, our future and our environment.

There’s nothing mythical about the positive impact shale gas drilling is having on our entire state. Realistically, even the non-Marcellus region has discovered “El Dorado” through the Act 13 Impact Fee, which has generated over $630 million, to date, according to the Public Utility Commission (PUC). While 60% is designated to return to the counties where the drilling is taking place, the balance is transferred to non-Marcellus production counties after some defined allocations are made to regulating agencies. To date, that’s over $250 million sent downstate as a diplomatic gesture.

You and the radical anti-drilling crowd are promoting a statewide moratorium, thinly veiled as a call for a severance tax, while refusing to recognize the effectiveness of the Impact Fee to remedy the real drilling impacts. The “adequate” tax you propose isn’t about remedying impacts, but rather feeding a “tax and spend” system whose insatiable thirst will inevitably yield to a market-driven moratorium.

In the Rendell years, numerous severance tax proposals would have placed Pennsylvania’s proposed energy tax at or above a national high of 7.5%, in addition to Pennsylvania already having the nation’s highest corporate tax rate of 9.99%, in effect crippling the development success we now enjoy. According to Associated Petroleum Industries of Pennsylvania, our current state tax structure has already generated over $2 billion from the drilling industry since 2007.

You attempt to rally support by invoking envy. You falsely portray the severance tax as being “extracted from the fracking companies,” but in reality, the rise in energy costs as a result of a new tax will be passed on to the consumer, which only raises heating and electricity costs, hurting the poorest among us most. The residents of Marcellus country overwhelmingly oppose the imposition of a new energy tax, demonstrated in the proposal’s defeat in the most recent budget battle. When these facts are weighed, we think our contributions from Marcellus country are more than “adequate” already.

We are building the legacy of shale gas development in Pennsylvania today, but I am far more optimistic about how history will remember us. It will be an organized, informed, and engaged royalty owner who will be the catalyst for balanced, common-sense shale gas development. 96% of unconventional natural gas produced in Pennsylvania is produced by members of the leading industry trade group. Royalty owners also need to recognize the value of organizing around our interests in an effort to ward off threats to our rights which include the imposition of punitive taxes, moratoriums, and our on-going struggle to be paid properly for our gas.

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