The Right State Policies Can Drive Job-Creating Investment

Natural gas development in the Marcellus Shale region is “fueling a wave of investment in U.S. petrochemical plants,” CNBC reported this week. According to the report, shale gas production in the tri-state area, coupled with new investments in ethane cracking facilities – such as the project under construction in Beaver County – present an opportunity to transform Pennsylvania and nearby states into an energy hub that supports more than 100,000 jobs. From CNBC:

The American Chemistry Council envisions a regional transportation and storage hub that could create tens of billions of dollars in economic expansion and about 100,000 jobs. The formula is fairly simple. The Marcellus and Utica shale formations, two of the biggest natural gas fields in the U.S., largely lie beneath Pa., Ohio, W.Va. and N.Y. The surrounding Rust Belt is also home to many of the country’s plastics manufacturing factories. What’s missing is the link between the two: the massive plants that turn natural gas byproducts into the inputs needed to manufacture plastic products.

The production growth making this wave of development possible is expected to keep increasing, the International Energy Agency said this week. Global demand and use of clean-burning natural gas will increase 1.6% per year through 2022 thanks to “remarkable growth” in American production, the agency said.

“Production from the Marcellus, one of the world’s largest fields, will increase by 45% between 2016 and 2022, even at current low price levels, as producers increase efficiency and produce more gas with fewer rigs.”

To ensure we can leverage the bright manufacturing opportunities that increased shale development is generating, Pennsylvania needs competitive policy solutions to drive energy production and new job-creating investment. During interviews with KDKA and WNPV radio this week, MSC’s Dave Spigelmyer discussed what’s needed to help drive energy job growth.

Here’s what Spigelmyer had to say about getting the equation right:

POLICIES MATTER TO ATTRACT INVESTMENT, JOBS

Certain areas of the country are in a much better position than Pa. is from a competitive standpoint. For instance, in the southwest region of Pa., we’re averaging 217 days to approve a simple earth disturbance permit. We’ve lost capital as a result of that. We’ve had companies that had the ability to spend capital in Pa. have to turn it back.

“We have some of the best rock for development in the country and we’re close to consuming regions of the U.S. I think we’re in a very, very good position, but policies matter and we need to make sure we get that equation right if we’re going to be successful long-term. We have lost capital, we have lost jobs, and it’s because we don’t have our competitive equation right yet in Pa.” (WNPV)

PA’S MANUFACTURING OPPORTUNITY

“What I would love to see and what I think we are starting to witness here in Pa. is the opportunity to use some of that gas in some of those downstream manufacturing processes that will create jobs and economic opportunities right here in western Pa. and across the state that put people to work, and, let’s frankly say it, keep our kids at home once they graduate from either high school or college or technical school.

“The fact that we’ve got a petrochemical facility being developed in the southwestern part of the state where we can use some of that product here is important. The development of pipelines to get some of that ethane into the eastern part of the state is important. I think seven or eight years from now we’re all going to be sitting back and saying, ‘Now I get it.’ The manufacturing benefits for our state are enormous if we get the policies correct in Pa.” (KDKA-AM)

DIRECT CONSUMER BENEFITS

We have 17 natural gas power generation facilities that are being scoped for Pa. That’s significant demand for the product, and the great thing for consumers is if you take a look at those of us who use natural gas to heat our homes, to cook our food, to dry our clothes.

“[There’s] a great benefit to consumers in Pa…to continue to produce power at reasonable prices. I think it’s actually our competitive hand for our country. We’re able to produce products with the cheapest energy in the world, and it’s because of the fact that we’re producing these resources here in Pennsylvania and in our region.” (KDKA-AM)

STRENGTHENING AMERICA’S ENERGY SECURITY

“[Natural gas exports] create a great opportunity for us in strengthening our geopolitical hand abroad by having the ability to send some of our natural gas product oversees. We have the ability to use some of that gas in international markets, and I think, as I said before, it really strengthens our hand geopolitically.” (KDKA-AM)

PA’S NATURAL GAS IMPACT TAX WORKS

The local impact fee is a tax and I think everyone in Harrisburg knows it’s a tax. It’s raised $1.2 billion dollars in the last year. As I said before, it raised $173 million dollars [this year] that spread all the way across Pa.

“If you put the Pa. impact tax that passed in 2012 up against other shale states that have a severance tax, we produce more in revenue than four of those major states combined. If I take Colorado’s numbers, Ohio’s numbers, West Virginia’s numbers, and Arkansas’ numbers and combine them, we produce more in our impact fee than those four states do together.” (WNPV)

“There are a number of projects that have been funded directly through the impact tax. A lot of folks keep focusing on severance tax. I would tell you the impact tax that passed in 2012 has been a huge winner for western Pennsylvania and Allegheny County in particular—about $10 million of direct benefit to municipalities and county government, but also through the Marcellus Legacy Fund. Things like the Montour Junction Trail Project, the Crafton Pool Rehabilitation, the Plum ballfield, the Frick Environmental Center, those have all been benefactors of investments that have occurred through the Marcellus Legacy Fund.” (KDKA-AM)

“So I would tell you it’s not about if we’re being taxed, it’s about how much and who gets to spend it. …. Impact tax revenues don’t go into the general fund and are not able to be spent to fill the black hole of the budget.” (WNPV)

Learn more about natural gas development by visiting the MSC’s blog and join the conversation on social media with #NatGasWorks on Twitter and liking the MSC on Facebook.