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Hitting 'pay dirt' in Pennsylvania

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By Lowman S. Henry
Friday, Oct. 12, 2012, 9:00 p.m.
 

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 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 more than $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.

Already substantial, the economic impact of Marcellus shale gas is only just beginning to be felt. Speaking at an industry conference in Philadelphia, Gov. 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 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.

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 Middle East have underscored the fragility of America's dependence on oil from that region. The Sept. 11 terrorist attack that killed the U.S. ambassador to Libya and widespread demonstrations revealed a cultural fault line that has opened a worldwide debate over freedom of speech that threatens to further destabilize the region.

It has become abundantly clear the United States must significantly reduce its dependence on oil from the Middle East. To do that, America must more rapidly develop domestic energy production, and a multifaceted approach is required. We must speed up the tapping of our abundant natural gas, coal and oil resources. Construction of the Keystone pipeline, issuance of more offshore oil drilling permits and responsible drilling in the Arctic 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.

Despite the overwhelming economic and strategic benefits of the Marcellus shale 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, which 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 overregulation. 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.

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