Richard L. Burleson
Last week, the Obama administration released the White House “Economic Report of the President,” a 414-page document that details a “breakthrough year” in 2014. I want to point to some of its highlights, and then ask a single legitimate – if pointed – question.
From the report:
Even though these conclusions speak for themselves, let me summarize.
The domestic energy revolution has created jobs, supported communities, cut oil imports, reduced the trade deficit, enhanced local government services, saved families and businesses money on their monthly power bills, and improved our energy security.
So here’s my question:
Given all of that, why is the White House targeting the industry with punitive tax proposals (killing the so-called tax breaks for oil and gas companies) and burdensome regulations (for example, methane reductions on a sector that is already cutting them voluntarily) whose practical effect is to drive up costs and slow, cripple, or even stop the U.S. boom?
Kevin Colosimo, the managing partner in Burleson’s Pittsburgh office, had a really strong opinion-page article in the Cleveland Plain-Dealer last week laying out the arguments against Ohio Gov. John Kasich’s proposed severance tax on drillers.
He wrote in detail about how the plunge in oil prices has already affected the state, and that the tax is “an especially wrong move at the worst possible time” given OPEC’s war on U.S. shale production. After citing the oil and gas industry’s positive contributions to the Ohio economy, he concluded:
“Rather than cut state spending – which rose more than 20 percent during his first term, according to Opportunity Ohio – (Kasich) has instead decided to place a ‘success tax’ on oil and gas companies that will have the collateral effect of costing Ohio citizens jobs, opportunities, and higher incomes.”
Kevin is absolutely right. But one of things I have found most interesting is how Kasich has responded to criticism and questions about his decision.
According to Crain’s Cleveland Business, the governor was asked during remarks in Columbus if, with depressed prices, this was the right time to raise taxes. He replied: “It’s never the right time, is it? They've had three or four years…of free.”
He also suggested one way for drillers to avoid paying the tax: “If you don’t drill, then you don’t pay. It’s only when you sell that you would pay.” (Of course, if you don’t drill, you don’t create jobs, make investments, or generate local government revenues, either.)
And perhaps most concerning of all, he suggested that private ownership of drilling rights is somehow bad and that the State has rights, too. Kasich said of drillers, “You make us a poorer state. Every time you take valuable things out of the ground, you make us poorer.”
His logic on that one escapes me.
As Kevin pointed out, the oil and gas industry has supported 200,000 jobs in Ohio. Production in the Utica Shale has been the primary driver of a 53 percent drop in unemployment statewide. Nine counties that make up the Utica Shale’s core have seen $22.5 billion in investment because of shale energy development.
That doesn’t exactly sound like an industry that is making the state “poorer.”
I find it odd that Kasich – a conservative with, some say, his eyes on the White House – would single out an industry that has been responsible in no small part for Ohio’s economic achievements. As Kevin stated, the move to increase the severance tax on drillers – accompanied by the governor’s “fighting words” in defense of his plans – amounts to nothing less than a declaration of war against oil and gas companies.
If that’s how Kasich treats an industry that has been such a friend to Ohio, I’m hard-pressed to imagine what he’d do to the state’s real economic enemies.
A few weeks ago, I wrote that while drilling critics have been laying the cause of small earthquakes around Irving at the door of hydraulic fracturing, researchers, scientists, and seismologists have not been so quick to assess blame. Last week, we got the first bit of evidence to suggest that activists’ fears may (not surprisingly) be greatly exaggerated.
A team from Southern Methodist University has been studying the recent spate of tremblors in North Texas, and has determined that there is a narrow, “shallow” two-mile fault line that runs from Irving to West Dallas. That, they say, is where the tremors are occurring, and it will probably be the focus of their continuing investigation.
According to an interim report released last week, the quakes occurred in “the shallow crystalline basement (granites) below the sedimentary rocks (sandstones, shales, limestones, etc.) that comprise the Fort Worth Basin,” at depths of between 4.5 and 7 kilometers – or three to five miles underground.
But while most news reports acknowledge the shallow depth, here’s a fact that has for the most part been inexplicably omitted from the coverage:
“Production and disposal activities in this region are generally confined to the sedimentary units overlying the basement rocks.”
Translated, that means the quakes, though comparatively shallow, are still starting a lot deeper than drilling and wastewater injection activities.
What’s more, those trying to link the quakes to fracking have pointed the finger of guilt at a pair of wells in the area that were shut down years ago. But a U.K. geologist who has studied the connection told the Dallas Morning News most of the tremors he’s seen that might be associated with fracturing took place no more than a few hours after drillers commenced the process.
When asked if he could think of any way the long-closed wells could have caused the quakes, he replied: “It’s not totally impossible, but I find it hard to believe.”
Also, in examining the “possible mechanisms” of the quakes, Brian Stump, an SMU seismologist, said, “These are not injectors, where fluids are being disposed of.”
I’ve tried to steer clear of any commentary about the Keystone XL Pipeline, mostly because the issue has long ceased to be about energy security, infrastructure, or responsible policy and is now purely about politics.
But with the Senate passing a bill last week forcing its approval – and the White House promising a veto – I wanted to look at one argument that pipeline critics have seized upon and to show how truth can become the first casualty in the environmental debate.
We’ve all heard the claim: Building Keystone would result in “dramatic” increases in carbon pollution that will worsen climate change and bring the planet to the brink of environmental catastrophe.
Sounds pretty scary. The problem, though, is that it just isn’t true.
In 2012, total U.S. greenhouse gas emissions reached 6.5 billion metric tons. The Environmental Protection Agency has estimated that the tar-sands crude moving through the pipeline would result in an additional 18.7 million metric tons of carbon dioxide annually compared to conventional oil, which is less carbon heavy.
That amounts to less than one percent of U.S. greenhouse gas emissions, and what The New York Times in April called “an infinitesimal slice of the global total” of 32.6 billion metric tons.
Now take a look at what else EPA says:
Agriculture, including flatulence and belching from cattle, produced 526 million tons of greenhouse gases in 2012; industrial processes such as iron and steel production, 334 million tons; and land use and forestry, 37.8 million.
Yet no one is urging the Obama administration to outlaw cows, steel mills, or tree-planting. Of course, that’s because none of those things generate the passion (and, cynics might say, the fundraising) that Keystone does, despite the fact that it has just a small fraction of the climate impact by comparison.
Personally, I think a case can be made for Keystone and that it should be built. But that case is based on facts. And this debate isn’t even remotely acquainted with the facts.
I don’t agree with The Times on much of anything, but the paper got it right in reporting that “when it comes to the pipeline’s true impact on global warming…Keystone’s political symbolism vastly outweighs its policy substance.” It’s just too bad that shouts from the pipeline’s critics keep drowning out the voice of reason.
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