Higher Energy Taxes Threaten Shale’s Manufacturing Renaissance

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SHALE DRIVES U.S. MANUFACTURING RESURGENCE

  • “Shale has Reversed the Fortunes” of American Manufacturing: Domestic plastics production and related manufacturing has a bright future because of the growth in shale natural gas …  “Shale gas development has reversed the fortunes of the U.S. plastics industry,” the authors of the ACC study wrote. “Because the competitiveness of plastic resins depends on energy costs — in particular, the difference between oil and natural gas prices — the surge of natural gas production from shale has changed the competitive landscape for U.S. plastics.” That’s good news for Shell Chemicals and those who support its proposed ethane cracker plant for Potter Township because the plant will produce polyethylene pellets used in plastics manufacturing. “Shale development continues to be a powerful economic engine, especially for our manufacturing sector, as this new report and countless others reflect,” said Dave Spigelmyer … “We have a truly historic opportunity to reestablish Pennsylvania as a leading manufacturing state thanks to our abundant natural gas base coupled with a second-to-none workforce.” … ACC said the plastics industry will “directly generate” 127,500 jobs and another 172,900 indirect jobs in related industries that supply materials, utilities, parts and services. Those U.S. workers will receive $19.1 billion in wages with local spending expected to support 161,000 additional jobs in other business areas, ACC estimated. … “To make certain that we fully realize these broad-based benefits for all of Pennsylvania, leaders in Harrisburg should pursue commonsense policies aimed at attracting more investment into the Commonwealth and creating even more jobs,” Spigelmyer said. (Beaver Co. Times, 5/15/15)
  • Shale Gas “Has Given the U.S. a New Competitive Advantage”: The nation’s shale gas fields have given the U.S. a new competitive advantage in the plastics industry, helping to spur $130 billion in new capital investments, according to the American Chemistry Council. In a report looking at the rising competitive advantage of the U.S. plastics industry, the council found that inexpensive supplies of natural gas are tipping the favor of the plastics industry toward the U.S. … “Because energy resources — which account for up to 70 percent of total costs for plastic resin producers — are the primary raw materials to make plastic resins, the price of energy feedstocks is critical to the global competitiveness of plastic resin producers,” the report said. (Pittsburgh Business Times, 5/14/15)
  • Affordable Shale Gas has “Flipped the Fortunes” for U.S. Manufacturers: [ACC released] an economic analysis projecting that plastics makers will add 127,500 direct jobs over the next decade. … The growth in the sector largely reflects the nation’s energy dynamics — and, in particular, the abundance of cheap natural gas being tapped in recent years. Breakthroughs in hydraulic fracturing have sent U.S. gas production surging and pushed down electricity costs for consumers. Those lower prices have given many U.S. manufacturers, who are huge electricity users, a competitive boost in the global marketplace. … In plastics, the United States’ cost advantage in natural gas is particularly large, industry leaders say. … “Feedstocks in the U.S. have completely flipped our fortunes” compared with international competitors,” Steve Russell, vice president of the chemistry council’s plastics group, said. (Washington Post, 5/12/15)
  • U.S. Manufacturing is “Mounting a Comeback” Thanks to Affordable Natural Gas: After a lengthy stagnation, the U.S. plastics industry is mounting a comeback thanks to a surge of cheap, abundant natural gasthat’s providing the nation with a competitive advantage over other countries for the first time in years, a new report finds. The shale boom reversed fortunes for the U.S. plastics industry, which ranked among the highest-cost producers in the world just a decade ago … “Today, America is one of the most attractive places in the world to invest in plastics manufacturing,” Steve Russell, the council’s vice president of plastics said. … Domestic plastic makers have been capitalizing on the flood of inexpensive natural gasunleashed in recent years by advances in horizontal drilling and hydraulic fracturing techniques, lowering the cost of U.S. production compared to other countries. … Overall, plastics industry investments are expected to generate 127,000 new high-paying jobs, the report said. Workers at plastics materials plants, on average, earn$85,000 per year, the council said. “(That’s) more than 73 percent higher than the average wage for workers across U.S. industries,” Russell said. “Companies are ‘re-shoring’ jobs to the U.S. as new manufacturing is increasingly being located here at home.” (Houston Chronicle, 5/14/15)

HIGHER ENERGY TAXES HURT JOB GROWTH, ECONOMY, LOCAL COMMUNITIES

  • Higher Energy Taxes Jeopardize Shale’s “Game-Changing” Benefits: In a letter to Pa. legislators and Gov. Wolf’s administration, a consortium of business owners, community leaders and association executives on Thursday implored the government to reconsider before hiking natural gas industry taxes. … Signators hailed the gas industry’s recent progress and potential as “an absolute game-changer,” according to MSC President David Spigelmyer; and a “window of opportunity for historic industrial investment and growth,” Pa. Chemical Industry Council President Jeff Logan said. Stressing the dramatic positive impactnatural gas development has had on the state’s economy, Pa. Chamber of Business and Industry President Gene Barr stated, “Pennsylvania cannot afford to lose our competitive advantage in the shale play … A higher severance tax will drive our fastest growing industry out of the state.” Pa. Manufacturers Association President Dave Taylor said the state’s natural gas revolution is a “one-two punch for manufacturing competitiveness.” … A recent study determined that the proposed additional tax could result in massive job loss over the next decade, leading to a $20 billion loss. (Pa. Business Daily, 5/14/15)
  • Higher Energy Taxes will “Hurt our Economies and Local Communities”: As much as the Marcellus Shale has fueled an energy boom in the state, business owners and others who are links in the supply chain to the natural gas industry expressed their concerns about the effects of a proposed severance tax. … In the last 10 years, about 250,000 jobsindirectly and directly connected to the development have been created across the state, [Speaker Mike Turzai] said. The impact fee that would be repealed in Wolf’s plan benefits all counties, even those where no drilling occurs, he added. …. “We want to develop the usage of natural gas so that it continues to provide economic vitality and energy independence,” Turzai said. Bob Housel’s company, Masters Concrete, went from bust to boom due to the Marcellus, increasing revenues by 115 percent in 2013, hiring more employees and upgrading plants and equipment. His story was one of how the shale development has a wide economic reach beyond the place where drilling take place. “All of the raw materials we use in our plants are made in Pennsylvania,” Housel said. But the governor’s plan to impose 5 percent severance tax on natural gas … has effected more than drillers, it’s depressed his business, Housel said. … [Lackawanna College] has a nearly 100 percent placement rate of graduates in the industry for jobs that pay between $50,000 and $70,000We could not operate the programs that we do without that investment,” Volk said. Since the proposal of the severance tax, the school has had difficulty placing interns and Volk urged the lawmakers to take a careful look at imposing new taxes on the industry. … Turzai asked the governor to lend an ear too. “So positive economic job growth, good public policy in the impact fee and governor please, please you’re going to hurt our economies and our local communities if you continue to push a policy that’s not taking into account these stories,” he said. (Times Leader, 5/14/15)
  • Additional Energy Taxes Curtail Job Growth, Harm Small Business: Gov. Wolf has proposed a five percent severance tax on natural gas drillers but many say it will cost local jobs. With a possible severance tax looming on natural gas drillers, industry experts say the move would kill jobs. “This severance tax will be the worst tax at the worst time possible. It will impact job growth,” Cabot Oil & Gas spokesman George Stark said. … “We always hear them say ‘we’re the only state without a severance tax.’ What we never hear them say is ‘we’re the only state with an impact fee.’ They don’t give both sides of the story,” Vince Matteo with the Williamsport/Lycoming Chamber of Commerce said. Lackawanna College has dedicated its Susquehanna County campus to the gas drilling industry. … Republicans credit the Marcellus Shale and related industries for already creating 249,000 jobs in Pennsylvania. “The potential for continuing that growth in jobs lies ahead of usWhy would we want to stop that in its tracks? Look at New York!” House speaker Mike Turzai said. (WBRE, 5/14/15)
  • Small Business Owners Agree: “Don’t Pass” Higher Energy Taxes: Industry leaders from Northeast Pa. had a request for state lawmakers Thursday: don’t pass a natural gas severance taxproposed by Gov. Wolf. “For those of you who doubt if the severance tax will make companies leave, I have news: some of them already have,” said Bob Housel, vice president of Masters Ready Mixed Concrete. … Mr. Housel said his business, comparatively small and family owned, was hit hard during the recession. But revenue has been up 115 percent since 2009 … Adam Diaz, owner of the Diaz Companies, said of the severance tax, “You can’t be upset or frustrated that other companies have left. They have their own balance sheets. “But if the gas pulls out,” he continued, “what does that do with the cash flow through the community?” (Citizens Voice, 5/15/15)

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