Posts Tagged natural gas

Natural Gas: Location, Location, Location


By Lowman S. Henry

There is an old adage in the real estate business that three factors affect the price of a property: location, location, location.   It is a truism that might also be adopted by Pennsylvania’s natural gas industry. Not only is the commonwealth blessed by abundant reserves in both the Marcellus and Utica shale regions, but our geographic location has the state poised to take advantage of a potentially enormous export market.

The exportation of liquefied natural gas could be the next big economic boom for Pennsylvania. Drilling in the Marcellus shale region has yielded a bounty of new natural gas supplies, so much so that prices have begun to dip. The industry has tremendous room for production growth, so the opening of new markets is essential. Pennsylvania, with its access to ports, has the ability to move liquefied natural gas products from the well head to foreign markets in a cost-efficient manner.

To understand the size of potential foreign markets it is important to grasp the versatility of natural gas liquids. Hydrocarbons, including ethane and propane, serve as key components for the manufacturing of plastics, and for the chemical industry. The gas is used as fuel for heating and cooking, and can also be blended into vehicle fuel. The demand for such products is expected to grow dramatically as emerging economies across the globe continue to develop. Therefore, gas products produced in Pennsylvania have the ability to literally fuel both domestic and international economic growth.

Already Penn’s Woods has seen an economic revival due to the development of the Marcellus Shale industry. Production of natural gas liquids from the Marcellus region is estimated to exceed 1.6 billion gallons per year by 2015. More manpower will be needed to extract that gas, and a PricewaterhouseCoopers study estimates up to one million new jobs could be created by 2025.

Adding further to the potential of this resource is the fact that estimates of gas trapped in the Marcellus Shale reserve continue to be revised upward. Estimates of gas available in the Utica Shale region also continue to evolve. Thus, projections of production levels and potential job creation may be vastly underestimated as the industry and government gets a better handle on the size of the resource available for development.

The Marcellus Shale industry has already had a transformative effect on vast swaths of Pennsylvania that previously had languished economically for decades. The potential to create a sizable export industry for natural gas liquids will not only keep that boom alive, but will expand the economic benefits to other regions of the commonwealth as the product is transported to foreign markets.

More broadly, an upsurge in natural gas exports will have a positive effect on the current U.S. trade deficit. Reducing that deficit means less borrowing from China and other nations that already hold a significant amount of U.S. debt. Increased capacity will also help lessen the Russian stranglehold on the industry, giving the U.S. a key new card in international diplomacy.

The problem, as always, is government. The federal government must act quickly to grant approval for more exportation of natural gas liquids. And here in Pennsylvania, state government must resist the urge to kill off a promising surge in gas exports by throwing up regulatory roadblocks or enacting new taxes on the industry. The success of the natural gas industry has been viewed by some lawmakers as a potential piggy bank for funding pet projects. But, it is a truism that if you want less of something tax it, and placing a “success tax” on the natural gas industry is a surefire way of preventing the industry from reaching its full potential and stifling the creation of much needed new jobs for Pennsylvanians.

Governor Tom Corbett has stood firm in his opposition to the enactment of job-crushing new taxes, but as the gas industry expands its export component look for renewed pressure by the spending interests to extract higher taxes. The fact is tax revenues – from corporate, personal income, sales and other taxes – will rise naturally because of the expanded economic activity created by development of a natural gas liquids export market. That, and not higher tax rates, is the pay-off to government.

Pennsylvania has been blessed with a golden opportunity to reinvigorate its economy, put our citizens back to work, and contribute significantly to the nation’s energy independence. Time will tell if our state government will be a partner in this progress, or a roadblock to success.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)

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‘Golden Age of Gas’


By Lowman S. Henry

There is no doubt that development of Pennsylvania’s Marcellus Shale natural gas resources has fueled an economic boom across a wide swath of rural Pennsylvania, a region that has floundered economically for decades. But, the impact of Marcellus is being felt not only in those communities, but across Penn’s Woods and – as recent events illustrate – could actually play a global role.

After much debate, the General Assembly passed a tax – deceptively called an “impact fee” – on Marcellus gas drillers. The tax has resulted in over $206 million in revenue to date. Ultimately 58 companies have been singled out and are required to pay the additional tax above and beyond the taxes all other businesses in the state are required to pay. Although taxing a business just because it is successful is poor public policy, many local communities will benefit from the revenue. The amount of tax payments exceeded initial projections attesting to the vibrancy of the Marcellus gas industry.

Already substantial, the economic impact of Marcellus gas is only just beginning to be felt. Speaking recently at an industry conference in Philadelphia, Governor Tom Corbett dubbed what has happened so far as the “tip of the spear” which will spark a new industrial revolution in Pennsylvania. This was not rhetorical hyperbole. Already the Shell Chemical Company is moving toward development of an ethane “cracker” plant in Beaver County that the Pennsylvania Economy League estimates could create 8,000 new jobs and have a $4.8 billion impact on the state’s economy.

Manufacturing in Pennsylvania has fallen on hard times in recent decades. In fact, more people are now employed by government than hold jobs in manufacturing. The creation of 8,000 new jobs in the energy industry is indeed a game changer. As XTO Energy President Jack Williams recently observed this “golden age of gas” is indeed reviving the state’s manufacturing sector.

In addition to the domestic benefits of Marcellus gas development, the shale reserve could play an important international energy policy role. Recent developments in the Mid-East have underscored the fragility of America’s dependence on oil from that region. The September 11th terrorist attack that killed the U.S. Ambassador to Libya and the widespread demonstrations purportedly spawned by a movie trailer denigrating the Muslim prophet Muhammad revealed a cultural fault line that has opened a worldwide debate over freedom of speech that threatens to further destabilize the region. Add to that the expanding influence of Iran and growing crisis over that nation acquiring nuclear weapons capabilities and the threats to the world’s oil supplies are growing greater by the day.

It has become abundantly clear the United States must significantly reduce its dependence on oil from the Mid-East. To do that America must more rapidly develop domestic energy production; and a multi-faceted approach is required. We must speed up the tapping of our abundant natural gas, coal and oil resources. Construction of the Keystone KL pipeline, issuance of more off-shore oil drilling permits and responsible drilling in the Artic Natural Wildlife Refuge are keys to oil development. The Obama Administration’s “war on coal” must be ended and the industry re-incentivized to spur development. And, of course, we must foster policies that encourage, not discourage the further development of our natural gas resources.

There also is a role for so-called “renewables” in America’s energy self-sufficiency equation. But, wind, solar and tidal power has yet to reach a technological point where they are economically feasible. That doesn’t mean we shouldn’t continue working toward that end, it is just prudent to view those energy sources as long-term rather than near-term solutions.

Despite the overwhelming economic and strategic benefits of the Marcellus gas industry in Pennsylvania challenges remain. Radical environmentalists seek to stop further drilling rather than to advocate for reasonable safeguards. Misinformation about fracking and other aspects of shale development runs rampant. And, as always, there are elected officials who see a goose laying golden eggs they want to take to finance unrelated politically popular programs.

For state government the challenge going forward is to not get in the way. Lawmakers must avoid the temptation to overtax, and the administration must resist calls for over-regulation. So far, a relatively reasonable balance has been struck. A lot is riding on keeping it that way.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)

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This Week on Lincoln Radio Journal: PA Lt. Governor Jim Cawley


On Air this August 27, 2011 – September 2, 2011

This week on Lincoln Radio Journal:

  • Lowman Henry talks with Pennsylvania Lieutenant Governor Jim Cawley about the Marcellus Shale Advisory Commission report
  • Joe Geiger has Michele Daly of the Women’s Resource Center in the Nonprofit Spotlight
  • And, Scott Paterno has an Uncomfortable Truth commentary on the environmental impact of electric cars.

This week on American Radio Journal:

  • Lowman Henry talks with Joe Hicks of PJ TV’s Minority Report and The Hicks File about the impact of multi-culturalism
  • Adam Tragone of Human Events has an Off The Cuff interview with Mark Steyn author of After America
  • And, Dr. Paul Kengor from the Center for Vision & Values at Grove City College has an American Radio Journal

commentary on the cause of our nation’s fiscal woes.

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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