by Walter Brasch
Gas prices
have plunged to the low $2 range—except in Pennsylvania.
In
Pennsylvania, the prices at the pump are in the mid-$2 range.
That’s
because Gov. Tom Corbett and the legislature imposed a 28-cent per gallon
surcharge tax. Until 2019, Pennsylvanians will be paying an additional $2.3
billion a year in taxes and fees—$11.5 billion total—to improve the state’s
infrastructure. In addition to the increased tax on gas at the pumps,
Pennsylvania motorists will also be spending more for license registrations,
renewals, and title certificates.
For far too
many years, the state’s politicians of both major parties, preaching fiscal
austerity—and hoping to be re-elected by taxpayers upset with government
spending—neglected the roads, bridges, and other critical problems.
What the
state government doesn’t readily acknowledge is that much of the damage to
roads and bridges has come from increased truck traffic from the fracking
industry.
The state
roads, especially the section of I-80 that bisects the northern and southern
halves of the state, were already in disrepair, as any long-haul trucker can
attest. The addition of 40-ton fracking trucks on two-lane roads, highways and
the Interstates, has added to the problem.
“The damage
caused by this additional truck traffic rapidly deteriorates from minor surface
damage to completely undermining the roadway base [and] caused deterioration of
several of our weaker bridge structures,” Scott Christie, Pennsylvania’s deputy
secretary of the Department of Transportation, told a legislative committee in
2010. Since then, the damage has increased in proportion to the number of wells
drilled into the state. There are about
7,100 active gas wells in the state, with the cost of road repair estimated at
about $13,000 to $25,000 per well. The
fracking truck traffic to each well is the equivalent of about 3.5 million cars
on the road, says Christie.
Although corporations
drilling into Pennsylvania have agreed to fund repairs of roads they travel
that have less than two inches depth of asphalt on them, the fees don’t cover
the full cost of repair. Had the state
imposed an extraction tax on each well, instead of a much-lower impact tax,
there would have been enough money to fund road and bridge repair without additional
taxes for motorists. Every state with shale oil but Pennsylvania has an extraction
tax.
Gov.-elect
Tom Wolf, who supports fracking, says he wants the state to begin to impose
those extraction taxes. The politicians, who benefitted from campaign
contributions from the oil and gas industry, claim the industry—and all its
jobs—will leave the state if the taxes are too high.
There are
several realities the oil/gas industry knows, but the politicians, chambers of
commerce, and those who believe everything politicians and corporations tell
them don’t know or won’t publicly admit knowing.
First—as long
as it’s economical to mine the gas, the industry won’t leave the state, even if
they have to pay a 5 percent extraction tax, which is at the low end of taxes
charged by other states.
Second—the
expected $1 billion in extraction tax per year, even if the legislature
approves, should not be expected. The industry has already found most of the
“sweet spots,” and production will likely fall off in 2015, leading to less
income to the state and to leaseholders.
Third—like a
five-year-old in a candy shop, the industry salivated at the newly-found
technology and gas availability and overdrilled the past four years, leading to
a glut and falling prices. End of the year prices are about $3.17 per million
cubic feet, down almost 30 percent from November.
Fourth—falling
prices have led to drilling not being as profitable as it could be.
Fifth—the
OPEC countries have not lowered their own production of oil, and the reason for
the lower gas prices at the pumps is not
because of the shale gas boom, but because of the plunging price of oil per
barrel, which has declined by about 40 percent since Summer. Once oil prices fell
beneath about $70–73 per barrel, American shale frackers found themselves
unable to compete economically.
Sixth—To
compensate for lower prices in the United States, the megacorporate drilling
corporations have begun to find alternative ways to make money. One way is to
build a massive maze of pipelines, and send natural gas to refineries in
Philadelphia and the Gulf Coast, changing the gas into the extremely volatile liquefied
natural gas (LNG), putting it onto ships, and exporting it to countries that
are willing to pay more than three times what Americans are paying for natural
gas. However, there is an unexpected twist. The OPEC low-cost oil has led to a
severe drop in Russia’s economy and value of the ruble. Gazprom, the
Russian-owned world’s largest gas supplier, is now forced to drop its own
prices to be competitive, and has been developing plans to provide gas to
Europe and Asia, especially China where American gas is headed, at a price that
makes it uneconomical to do long-term contracts.
Seventh—the
banks and investment lenders are getting testy. Because of overdrilling,
combined with inflated estimates of how much gas really is in the Marcellus
Shale, corporations have found themselves in trouble. Many corporations have
begun cutting their drilling operations; others have already left the state,
burdened by debt to the lending institutions; some corporations have sold parts
of their operations or declared bankruptcy.
Eighth—The
jobs promised by the politicians, the various chambers of commerce, and the
industry never met the expectations. Gov. Tom Corbett claimed 240,000
additional jobs. The reality is the increase in jobs is about one-tenth of
that; more important, most of the full-time jobs on the rigs and well pads are
taken by workers from Texas and Oklahoma
who have extensive experience in drilling; most of the other jobs are
temporary, and layoffs have already begun.
Ninth—The
fracking boom for Pennsylvania is more like the housing bubble. At first, the availability of mortgages looked
like a boom. However, a combination of greedy investors and lending
institutions with almost no governmental oversight, combined by a client base
of ordinary people who were lured into buying houses with inflated prices they
couldn’t afford, led to the Great Recession.
Those who didn’t learn from the housing bubble guaranteed the fracking
boom would become a fracking bubble.
Tenth—The
continued push for fossil fuel development, and more than $4 billion in
governmental subsidies, slows the development of renewable energy, while
escalating the problems associated with climate change and brings the world
closer to a time when global warming is irreversible.
Finally, but
most important—The fracking industry doesn’t acknowledge that this newer
process to extract gas, which has been viable less than a decade, is destroying
the environment, leading to increased climate change, and putting public health
at risk, something that dozens of independent scientific studies are starting
to reveal. It was a 154-page analysis of public health implications, conducted
by the New York Department of Health, and based upon scientific and medical
studies, that led New York this month to ban all drilling—and infuriate many
politicians and some landowners who were expecting to make extraordinary wealth
by leasing mineral rights beneath their land to the gas companies. Of course,
they didn’t look to their neighbor to the south to learn the wealth promised
was never as much as the royalties delivered and that many landowners now say
they should never have given up their mineral rights and the destruction of the
land and farms that came with it.
Until prices
stabilize, Americans are paying lower prices for gas at the pump;
Pennsylvanians are also paying lower prices, but not as low as the rest of the
country.
And the
politicians and industry front groups continue to foolishly claim there are no
environmental or health effects from horizontal fracking, only blue sky and
rainbows of riches.
[Dr.
Brasch, an award-winning journalist and the author of 20 books, is a national
specialist on the effects of fracking. His critically-acclaimed book, Fracking Pennsylvania, is now in its
second edition.]