Framing the Dialogue

Jumping Jack Flash It’s A Ga$ Ga$ Ga$

Those living in Western Pennsylvania have been the object of a blitzkrieg of advertising about gas.  More specifically a very deep natural gas pocket found in the Marcellus Shale Formation.  Some estimates put the volume of gas in the formation at 500 TRILLION cubic feet which has fostered a great deal of interest in drilling this formation which is concentrated in the West Virginia-Pennsylvania-New York areas.  West Virginia and Pennsylvania seem to have the greatest potential.  Capture of this gas found in very deep geologic formations is not without significant costs and risks to both the drillers and the environment.  I would rather focus on the financial part, but did not want to overlook this issue.

In order to collect the gas, drillers much drill very deep (nearly one mile) vertical wells followed by horizontal drilling.  Once complete drillers want to maximize the amount of gas production so they fracture the rock with water to open up spaces by which to collect gas.  Fracturing wells a mile underground takes a great deal of water and in some cases chemicals are added to the millions of gallons of water to facilitate fracturing.  This creates three distinct problems for Marcellus Shase drilling; where can you get that much water in locations that are often remote, what do you do with the water that comes back out and now contains chemicals (either natural or added), and what are the possible ramifications of introducing chemicals into groundwater systems.  This an oversimplification of the issues.

There are many people and politicians stepping up on their soap boxes attempting to halt drilling in certain areas.  Unfortunately there are these pesky legal agreements called mineral rights that allow the owners to exercise their legal rights to their property.  They still try.  Much of the debate in Pennsylvania however has been about taxing the gas producers.  There are a lot of discussions about how best to tax (sometimes masked as “severence” payments) this rapidly developing market.   Pennsylvania’s Democrat-controlled House recenty approved a tax on this gas production.  The Republican-controlled Senate, however called the rate a “staggering economic blow.”  Both, however agree that this gas production will be taxed. 

This reminds me of a story about a man and a woman discussing sex.  The man asked if the married woman would sleep with another man for 20 million dollars.  The woman obviously hesitated and even said no at first, but when reminded what she could do for her family with the windfall, she demurred and admitted that she probably would.  The man then asked her if she would sleep with the same man for a thousand dollars and her agitated reply was a hearty “NO” and “what do you think I am a prostitute?”  The man calmly stated that “we have established what you are, we are now just negotiating the price.”

Republicans and Democrats both want the money the difference is a matter of price.  The taxpayers see the issue much the same way.  I recently was talking to a colleague in the environmental field and she briefly brought up the issue and made the statement that “I just know we have to tax this.”  I was like most residents assumed that a gas tax was a fete accompli

Why do we HAVE to tax it?

What would this amount of gas do for the economy of the region?  How would our personal finances be enhanced by an abundance of less expensive energy.  Winter is coming and I would love to see lower gas prices.  I cannot go a day without hearing or reading about high unemployment levels.  Would politicians be able to attract a company that needed a large supply of energy?  Would any company jump to locate where energy was abundant and cheap?  Would this create jobs?  Would these workers pay taxes? 

When you tax an activity you get less of it. 

As I mentioned, there are significant environmental obstacles to capturing this energy source.  These issues are rightly being handled in addition to the tax issue by professionals.  Costs to drillers should be commensurate with the environmental risk that can be reasonbly be calculated.  This is not new ground with processes that have a high potential impact on the environment.  We do need to regognise that it is impossible to fund every doomsday scenario.

I think back to a favorite television show as I was growing up, The Beverly Hillbillies (not the silly movie).  Those of you younger may have seen it on TV..Land.  Rather than celebrating the poor Jed Clampet’s fortunate discovery politicians would be participating in a feeding frenzy to see how they could take as much as possible.  The Ballad of Jed Clampett would have to be changed…

Come and listen to a story about a man named Ed
A rich politician, aptly kept his belly fed,
Then one day he was handin out some pork,
And up through the ground popped a gaseous cork.
Gas that is, clear gold, Pa tea.
Well the first thing you know ol’ Ed wants a share,
Citizens said Ed take taxes away from there
Said Marcellus is the place you ought to be
So they loaded up the fess and built their treasury.
Porh, that is.
Airports, tunnels underground.
The Pennsylvania Hillbillies!
Well now its time to say good-bye to Ed and all his kin.
And they would like to thank you folks fer kindly payin him.
You’re all invited back again to this locality
To pay a heapin helpin for their unhospitality
Hillbilly that is. Pay a lot. Take your wallet out. Y’all come back now, y’hear?

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