Pennsylvania Solution: U-Pay

You-PayPennsylvania has been through a few booms and busts in the past, from a lumber boom, an oil boom, to the reign of “king” coal and the legacy has been the same.

When the busts came and corporations left town Pennsylvanians were tapped to pay for restoring the forests, locating and plugging abandoned fossil fuel wells and cleaning up acid mine drainage problems.   When the Three Mile Island Nuclear Plant had a partial meltdown in March 28, 1979, the cleanup cost of approximately $1-billion was passed to investors and consumers to save Metropolitan Edison, Jersey Central Power & Light and Pennsylvania Electric from bankruptcy.

For about the past 10 years, Pennsylvania is in the throes of natural gas boom. Our government officials, like in the past, remain blinded by the promise of untold wealth and are quick to parrot the industry scripted talking points.   It’s short term gain in exchange for long-term pain for Pennsylvanians.

From 2009-2013 former Governor Tom Corbett championed the industry, and it grew at an alarming rate to the point of choking on its gluttony and leaving an unknown number of Pennsylvanians with serious health problems and without access to clean water. When Governor Tom Wolf took office in 2014, following the news of the New York ban on fracking, he proudly stated he wanted his cake and eat it too when it came to the natural gas industry.

His plan to have his cake and to be able to eat it too is to do away with the impact fee and impose a severance tax. The industry and Pennsylvania legislators oppose the severance tax and claim it would hurt the industry and be a job killer. In some areas of the sacrifice zones of Pennsylvania drillers are pulling out or slowing down their “frack-baby-frack” operations and telling locals it is because of the possible “severance tax”.

However, these same drillers have been slowing down or pulling out since mid-2013 when the market became glutted with natural gas and “fracking” was no longer profitable. Drillers headed for “wet gas” sacrifice zones to go after natural gas liquids (NGL), and oil. The NGL “boom” quickly turned into a bust with yet another market glut, and the oil they found was “too gassy”.

Under former Gov. Corbett, Pennsylvania DEP had a natural gas advisory committee pack with industry representative and supporters. Its purpose was to review and suggest regulations. What emerged were Act 13 and other legislation which can only be characterized as Gifts to the Gassers.

Gov. Tom Wolf split the committee into two committees, one for conventional drilling and a second for unconventional drilling. Like their predecessor, both of these are packed with industry representatives and supporters and more gifts to gassers are being prepared.

Pipeline Boom

In the rush to drill and frack, the industries ignored the need for an infrastructure to transport the product to market and are now playing catch up with massive build out of pipelines.

Communities, which were unaffected by drilling, are now targets for pipelines and related midstream facilities. Many opposition grassroots groups have emerged to stop the industrialization of their communities.

Gov. Wolf’s solution to the growing opposition is not to listen to concerns, but rather to form yet another committee called the Pipeline Infrastructure Task Force (PITF). It is being touted as a collaborative process to achieve a world-class pipeline infrastructure system.   Seats at the PITF table have yet to be filled. Given who is sitting at the other two tables, there is little reason to believe the people of Pennsylvania will have a real seat.

Alan M. Seltzer and John F. Povilaitis, attorneys in the Energy Law Practice of Buchanan Ingersoll & Rooney PC published an op-ed in PennLive on June 24, 2015 entitled “With pipeline task force – a Pa. solution to a Pa. problem.”

They point to Three Mile Island as an example of the “Pennsylvania Solution” where investors and customers paid for the cleanup: (emphasis added)

 The Pennsylvania Solution successfully resolved the economic havoc wreaked by the nuclear accident at Three Mile Island by allowing the nuclear plant cleanup costs to be shared between investors and customers and avoid the devastating consequences of a utility bankruptcy.

 The Federal Energy Regulatory Commission (FERC) implemented a new policy on Cost Recovery for Natural Gas Facilities Modernization:

The Federal Energy Regulatory Commission (FERC) today approved a new Policy Statement allowing interstate natural gas pipelines to seek to recover through a surcharge mechanism certain capital expenditures made to modernize pipeline system infrastructure in a manner that enhances system reliability, safety and regulatory compliance.

Today’s Policy Statement establishes guidance and a framework as to how the Commission will evaluate pipelines’ proposals for recovering costs associated with replacing old and inefficient compressors or leak-prone pipelines and for performing other infrastructure improvements and upgrades to enhance the efficient and safe operations of their pipeline systems.

 

Our nation’s pipeline infrastructure is decades old and in need of repair, repairs which have been long ignored by the industry because it was not cost effective.   With FERC’s policy, the repair and upgrade costs will be passed to the consumer.

 

Where is it going?

The pipelines, according to the industry, will supply “much needed” natural gas to communities. Which communities? Where are they located?

 

According to Alan Armstrong, CEO of Williams Partners in 2014 1st quarter report, the Atlantic Sunrise pipeline is headed for export facilities: (emphasis added)

“We’re excited about the accelerating pace of expansion projects at Transco, including Atlantic Sunrise, Dalton Lateral and our newly announced Gulf Trace project. The Atlantic Sunrise and Gulf Trace projects will serve as important infrastructure for future LNG export facilities at Cove Point and Sabine Pass.

Cove Point and Sabine Pass are part of the roughly two dozen other export facilities being proposed or are being constructed.   Communities to receive the “much needed” natural gas are located in Europe and Asia.

Looking at the pipeline routes currently being proposed or under construction, the majority of them terminate at an export facility or a hub which with a flip of a valve will allow the natural gas to head for an export facility.

The PennEast Pipeline, being proposed by a conglomerate of 6 corporations claims it will not be building export facilities.   It doesn’t need to. The PennEast pipeline terminates at a hub in New Jersey with an easy connection to Spectra Energy and Williams Partners pipelines. While technically PennEast will not be exporting, the pipelines connected to it and owned by others could send the natural gas to export facilities.

Export Boom

PE GlobalThe rush to export began when the Natural Gas, NGL market and the “much too gassy” shale oil quests failed to live up to the hype.

You may remember early in the natural gas boom, the PR campaigns were all about American Natural Gas for Americans and energy independence with a lot of flag waving.

Current industry PR campaigns tout “abundant and inexpensive” supplies of natural gas.

If American natural gas is suppose to be for Americans and make America energy independent, why are we exporting it? The answer is simple; fossil fuel corporations will make more profits selling the natural gas to Europe and Asia than they will selling to Americans. ( See: America for S(h)ale )

According to the government figures, Liquid Natural Gas (LNG) exports will result in a 14% to 36% increase in domestic natural prices at the wellhead. The impact to consumers will be felt as a 3-9% increase in domestic natural gas bills, followed by an additional 1%-3% increase in domestic electrical bills. The exact amount depends on how quickly the industry moves to exports. The slower the go the slower the increase. And of course, the flip side is true: the faster they go, the steeper the rise and the more quickly we’ll see it.

Like the hype we saw with natural gas, NGLs and shale oil, the export boom is not living up to expectations. According to the International Energy Agency report published on June 15, 2015: (emphasis added)

Lower prices will feed a pick-up in global natural gas demand over the next five years following a marked slowdown in 2013 and 2014, the International Energy Agency (IEA) said Thursday in its 2015 Medium-Term Gas Market Report. Nevertheless, the growth in demand will fall short of previous forecasts.

The annual report, which gives a detailed analysis and five-year projections of natural gas demand, supply and trade developments, sees global demand rising by 2% per year by the end of the forecast period, compared with 2.3% projected in last year’s outlook. A significant reason for the downward revision is weaker gas demand in Asia, where persistently high gas prices until very recently caused consumers to switch to other options.

“One of the key – and largely unexpected – developments of 2014 was weak Asian demand,” said IEA Executive Director Maria van der Hoeven. “Indeed, the belief that Asia will take whatever quantity of gas at whatever price is no longer a given. The experience of the past two years has opened the gas industry’s eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete.”

If these conditions remain, the export boom is over before it really starts.

Pennsylvania Solution is a Pipe Dream

The Pennsylvania Solution consists of more gifts to gassers and Pennsylvanians picking up the cost.

Gov. Wolf’s anticipated revenues from the proposed severance tax are being earmarked for many uses several times over. With each press release the anticipated outcome of the severance tax become more optimistic with a promise to solve Pennsylvania’s economic woes.

The current impact fee purpose was to be used to repair damages caused by the industry. Damages such as road and bridge repair.   Former Gov. Tom Corbett increased gasoline taxes to cover repairs. According to the Pennsylvania 2015 Transportation Performance Report, 8,821 miles of road have pavement rated as “poor” and are in need of rehabilitation or reconstruction and 35% of local bridges are structurally deficient. The numbers of smaller, locally-owned structurally deficient bridges have increased over the past five years which the impact fee was supposed to use for repairs.

Revenues from Wolf’s severance tax, should it be enacted, the bulk of it would go to restore education funding that was cut by former Gov. Corbett, and some towards road and bridge repairs, and a bit more funding of the Department of Environmental Protection (DEP).

What is missing is restoring water to families who now have no water due to natural gas drilling contamination. No health care funding for those who are ill from exposure to natural gas activities.   No studies for the impact on the environment or health.   No funding for renewable energy sources. No funding for cleanup costs when the industry leaves an area.

Natural gas is a finite source; sooner or later the industry will pack its carpet bags and leave. Pennsylvania will once again be left with a mess to cleanup.   The Pennsylvania Solution is to enact U-PAY. U-Pay for cleanup. U-Pay for health costs. U-Pay for restoration. U-Pay for well plugging. U-Pay and pay and pay for generations.

 

© 2015 by Dory Hippauf

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