Riding Two Unharnessed Horses Is Tough

Nor' east Thinkin'

Pennsylvania's governor trying to stay atop two Marcellus horses running opposite ways

Published on: October 7, 2011

I guess you have to give him credit for trying. Pennsylvania Governor Tom Corbett wants to keep the big political horses behind the Marcellus natural gas industry happy. So he opted to propose an impact fee, to be negotiated by individual counties – but with a low per-well cap.

In a nutshell, it would allow a flat, negotiated fee per well – not based on gas volume where the real money is at. The fees would start at $40,000 per well in the first year, and gradually drop to phase out after year 10.

However, a thundering herd that wants a severance tax on gas volume produced is shouting "Whoa!" And I have to agree, simply because that big horse is a fast-moving creature with gas pumped into its mouth and billions of dollars blowing out its hind.

Maybe the governor doesn't understand what real money is. [Politicians have trouble with budgets, you know.] Chesapeake, alone, holds 1.25 million leased acres with $15 to $20 billion in recoverable products in Ohio, Pennsylvania, New York and West Virginia. That's straight from the company's recent financial report.

As reported on our website, Exxon Mobil and Chesapeake Energy are pulling natural gas, gas liquids and oil from these wells. Even Chevron has joined the play. So this race isn't just about natural gas.

Legislation in the General Assembly's hopper would charge a severance tax of 4 to 5% of gas volume. In the big oil states of the Southwest, the tax ranges between 7 to 9%. With one of the world's largest shale gas reserves under our feet, these companies aren't going to pick up their drill bits and rigs and leave in a huff anytime in the next 20 years.

The cold hard reality is that rural school district programs, local conservation projects, and roadways and bridges are collapsing due to insufficient funding. The pipeline construction phase, now just beginning, will have just as great environmental impact.

At least Pennsylvania's governor is finally at the table. Now, the General Assembly can add his plan to their legislative “sausage-making” process.

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