Shepstone Management Company, Inc.
Governor Tom Wolf has done some positive things for natural gas but he sure has done a lot to undermine the industry and its potential.
Tom Wolf is very difficult to understand. Is he a friend of natural gas development? There’s an argument to be made that he is and he’s only be grappling with the political difficulties of being pro when his party is leaning ever further against gas; that he has to balance the wants of his Philadelphia region base against the needs of the Commonwealth as a whole. See our friend (and guest blogger) Garland Thompson’s brilliant articulation of that case here. I’ll be contributing a bit to that argument myself in an article I just drafted for the next issue of Shale Magazine, which you’ll be able to read there in a few weeks, but I laid the opposite case in the current issue (page 50). I encourage you to read the whole thing but a condensed version follows:
Now that Tom Wolf is free from having to run for governor again, he’s committed Pennsylvania to follow New York’s lead on several matters. These have included his decision, on his own, to put the Commonwealth into the Regional Greenhouse Gas Initiative (RGGI), the member states of which have accomplished but half of what Pennsylvania has done in reducing carbon emissions. But, they have managed to raise their electricity prices in inverse proportion, which counts as an accomplishment in the green world of renewables rent-seeking schemes.
Consider, for example, a few basic facts. RGGI states (New York, New England and friends) reduced their CO2 emissions associated with electric power generation by 17% between 2010 and 2016. It sounds good until you realize the Keystone State reduced its CO2 emissions by 32%, thanks to the shale revolution and natural gas being substituted for coal in generating power.
Moreover, Pennsylvania was, the largest net exporter of electricity in the United States from 2013-17, according to the U.S. Energy Information Administration. This means the Commonwealth has been supplying the lower CO2 power on which many of the RGGI states depend. It’s also less expensive power. RGGI states produce produce power, too but Pennsylvania electricity rates are 51% lower. Yet, Tom Wolf wants his state to join the losing side.
He’s also attempted, so many times most of us have lost track of the count, to enact what is, in effect, a second severance tax on natural gas production. He’s changed the nature, the size and the beneficiaries of the tax repeatedly in futile efforts to impose such a tax, falsely claiming Pennsylvania is the only major gas producing state without one.
But, of course, Pennsylvania does have a severance tax in the form of a Marcellus Shale Impact Fee that has raised hundreds of millions of dollars every year that is distributed primarily, but not exclusively, to areas of the Commonwealth that produce the gas. It funds all sorts of projects, while helping to lower other taxes at the local level.
It is, perhaps, because he isn’t getting his way on RGGI and imposing another severance tax that Tom Wolf is punishing the industry in other ways.
There is the continuing campaign by Wolf to impose new methane emissions rules even though those emissions are already being rapidly reduced by the private actions of shale companies who have ever incentive to capture them, as their business, after all, is selling the stuff. As the Marcellus Shale Coalition notes, “The industry’s focus on limiting emissions has helped lower combined methane emissions from oil and natural gas systems 23.2% since 1990” while “natural gas production has increased 50%.”
That wasn’t enough for Tom Wolf, though, and he proceeded, in 2018, to enact over the top and completely unnecessary regulations on new shale gas wells that did little more than temporarily appease his green supporters and raise the cost of production. Now, because his green friends are unappeasable and want more, he’s proposing additional methane emissions regulations on existing infrastructure and production.
Pennsylvania DEP claims the rule will eliminate 4,404 tons of VOCs and 75,603 tons of methane emissions at a cost of $35.3 million per year or $441 per ton. That cost, of course, will be passed onto natural gas companies and their consumers. Has anyone calculated the benefits versus the costs? Only if you accept the half-baked justification offered by DEP for their proposed new regulations, one based on a tangential relationship to ozone levels and accompanied by a disclaimer saying DEP is “not stating that these estimated monetized health benefits would all be the result of implementing the proposed…measures.”