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Energy Politics Are Fueling the Presidential Race

severance tax - MarkindDaniel B. Markind, Esq.
Weir and Partners, LLP


Taxes are high, gas prices are low and energy politics are clearly driving the polls; Americans are looking to for fresh new ideas not career politicians.

Today is the New Hampshire Primary, the traditional first-in-the-nation presidential contest.  A year ago, it would have been hard to imagine Donald Trump, with no political experience, and Bernie Sanders, who wasn’t even a Democrat until last year, leading in the polls.  If one thing is clear from the early stages, however, it’s that Americans of all stripes are shouting “No!” to any establishment candidates.

To understand why people are so cynical, one only needs to look at energy politics, with a focus on Ground Zero of the Marcellus Basin, Pennsylvania.

energy politicsYesterday, Republicans met to discuss two new resolutions implementing different potential mineral extraction taxes.  Each of these was proposed by fellow Republicans.  Currently, Pennsylvania is the only energy-producing state without such a tax.  Of course, Pennsylvania does have the equivalent of an extraction tax in its “local impact fee”.

The fee was the brainchild of the former Republican Governor Tom Corbett, who wanted to follow traditional Republican mantra and not raise taxes.  Instead, he permitted energy-producing localities to implement the fee if they so chose.  They so chose.

Every municipality in the State that could enact the fee did so.  Every single one.  So much for Republican theory that voters hated taxes.  Corbett, however, got no credit for this “tax” as he didn’t enact it.  That left the field wide open for an unknown Democrat, York businessman Tom Wolf, to crucify Corbett during last year’s Gubernatorial campaign as someone without the guts to make the energy industry pay its fair share.

energy politics

Once elected, Wolf introduced a draconian extraction tax in his first budget.  That got nowhere in the Republican-controlled State Legislature.  After months without a State budget, State legislators finally agreed to what in effect was a series of continuing resolutions.  Now it’s time for the second Wolf budget, and once again he will propose an extraction tax.

This time Republicans are beginning to contemplate accepting it, if for no other reason than to get the issue off the table in a presidential election year with a vulnerable Pennsylvania Republican Senator running (that thud you hear is me patting myself on the back for predicting and posting this repeatedly over the last year).   Strangely, Pennsylvania Republicans are desperately trying to claim that they really did raise taxes during a Republican administration, while Democrats insist they did not.

On the other side, the Wolf Administration last week pushed through a series of new regulations, some logical, some incomprehensible and some downright pecuniary, governing many aspects of shale drilling in the Commonwealth.  Democratic lawmakers and supporters exulted in socking it to the energy industry they claim has been making millions taking advantage of Pennsylvania, oblivious to the economic carnage before their eyes.

Gas prices plummet, layoffs and bankruptcies rise, but still the Democrats remain convinced that the evil energy industry is abusing the State, and they are going to change it.  By the way, working drilling rigs in Pennsylvania dropped this week to under 20.  Last year at this time we had 35.  Thanks largely to the shale industry, CO2 emissions nationally have dropped to their lowest levels in 20 years.

Lest you think Pennsylvania is alone in self-defeating policies, look nationally.  President Obama just proposed an increase in the gas tax by an additional $10/barrel.  This actually might be a good idea, provided the money generated is used to modernize our infrastructure and rationalize our grids and pipelines.  The Administration could support building out our pipeline system and encourage full use of domestically produced gas and oil, with export of any excess.  That of course, would require some recognition that from an economic and yes environmental perspective, the President has been helped substantially by an industry he detests.

energy politics

Instead his Administration does little.   FERC stands by as New York refuses to issue the 401 Clean Streams Permit needed to construct the Constitution Pipeline, meaning New England continues to be dependent on Middle Eastern gas while Northeast Pennsylvania producers have no place to send theirs.

Compounding that, Iran, chief benefactor of the Houthi tribesman in Yemen threatening the New England gas supplies, is now generating billions for oil reserves that it was prohibited from selling until it signed the nuclear deal.  That same nuclear deal did not contain any Iranian promise to stop spreading its Shiite insurgency and further threaten American energy supplies, but did contain an American agreement to lift sanctions on Iran’s chief military officers doing the threatening.

Another Iranian client, Syria’s Bashar Assad, is pushing hard into Aleppo, Syria’s largest city, exacerbating the refugee crisis that is destabilizing Europe.  Assad’s forces are helped by Russian air strikes.  The Russians generate almost 2/3 of their state revenue from energy supplies, and exert oversized influence over Europe through their natural gas.

Instead of giving American producers another market and freeing up Europe from Russian subservience, the Obama Administration stalls and limits export licenses.  Russia continues to have a stranglehold on Europe’s energy supplies, New England’s supplies are now more at risk than ever, American energy producers are running for cover, and unemployment rates in energy areas are rising at an alarming rate.

Does any of this make any sense?  That is the legacy of our current political crop, Republican and Democratic.  No wonder experience is not being valued very highly as New Hampshire votes.

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