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 Post subject: Marcellus Shale
PostPosted: Wed Mar 30, 2011 12:24 pm 
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To satisfy the purists in the crowd, I started a thread here on a subject that is very interesting and important to people in this part of the world.

The Marcellus Shale is a plate of shale about a mile deep that underlies roughly the western two thirds of PA, the eastern half of Ohio, almost all of West Virginia, the southern half of NY, and a bit of Maryland. The shale contains natural gas. Lots of it.

Pittsburgh is pretty much the epicenter of the "play". Extensive develpment has already been done in southwestern and northcentral PA. It is a boom that is bringing in millions if not billions, not just for the owners of the companies but also for landowners, the people who work in the industry, and people who benefit secondarily. it is just getting started, and it is going to be here for several decades.

Two relatively new techniques, horizontal drilling and hydraulic fracturing, are required to economically extract the gas.

Hydraulic fracturing requires lots of water, which becomes toxic due to the chemicals that are added to it plus what it picks up in the ground. A lot of it stays in the ground but what comes back up has to be treated, recycled, stored, disposed of, etc. For the most part groundwater is not being contaminated, although that can happen. The wells are sealed and the shale is a lot deeper than the groundwater.

P


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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 12:26 pm 
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PA is one of the few states that imposes no severance tax on natrual gas extraction. About 80% of the population is in favor of enacting such a tax, but our Republican governer, Tom Corbett, is adamantly in the 20%.


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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 1:03 pm 
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As well he should be, at this time.

I will dig up the estimated lost tax revenue a severance tax would produce to the state if implemented as in WV and other states.

As to the groundwater issue? From fracing, no way. Geology and physics won't allow it. From secondary procedures around drilling and casing, yes.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 1:14 pm 
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ZelieMike wrote:
As well he should be, at this time.

I will dig up the estimated lost tax revenue a severance tax would produce to the state if implemented as in WV and other states.

As to the groundwater issue? From fracing, no way. Geology and physics won't allow it. From secondary procedures around drilling and casing, yes.

ZM

Are the secondary procedures avoidable in the hydrolic fracturing process? If no, then I think you're making a distinction without a difference.

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 1:35 pm 
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Yes. Easily and 99% of the time.

However, like any industry, you have industrial accidents. People make mistakes.

Show me a place that shuts industry down due to the potential for an accident, and I'll show you a society hunting with spears.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 2:22 pm 
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ZelieMike wrote:
I will dig up the estimated lost tax revenue a severance tax would produce to the state if implemented as in WV and other states.
ZM


I would be interested in seeing that estimate.

I myself am pro-drilling and pro-severance tax. In fact many people in the industry are pro-severance tax. I feel that the extra revenue is needed to properly regulate and oversee the industry to minimize environmental damage.


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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 2:33 pm 
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Well, if someone can show me how to post a pdf on here that is not linked to a webphoto site, I will.

The main point is to ask what are you willing to sacrifice to give money to the state legislator coffers. Because we know two things will happen with a severence tax installed during THE EARLY GROWTH PHASES that we are in.

1. Rig count will drop and flatline - see any state where done, eg, WV
2. Local tax income will drop in favor of smaller revenue directly to PA treasury, due primarily to reduced activity.


And related, any severance tax income is more than offset, and more than doubled or more, in local and income taxes taken in by municipalities. The secondary effects.

The "environmental" issues are dealt with in permit fees, bonding, and owner/operator responsibilities already in regulation.

In short, you will end up shorting yourself at this point.

Once rig count stabilizes and the decline curves are known... not projected as now... you institute the severance tax.

In other words, don't tax during the growth phase to shut down growth. Tax during the stability phase when you won't be stealing from expansion.

this is what the successful states, like Wyoming, have done.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 5:11 pm 
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I don't claim to be expect on this MS drilling, but......
In WV where I live in the northern most part of the state, land owners (primarily farmers)are being paid $5,000 an acre for the mineral rights to their property and 18% from the sale of the natural gas when extracted. There is also a provision to pay them for certain inconveinces created by their roads, drilling structures, etc.

Believe me there is no hesitation by companies to buy and begin drilling in this tax state. I don't have to see any stats to know that people around here are getting large chucks of money as we speak and the whole panhandle of WV is excited and happy to be getting it. I'm not sure how the story that they won't drill here if taxed got started but it is not the case.

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 5:14 pm 
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And serverence tax does go to the state but is shared with both county and city governments in WV. I know that because I served for 8 years on Wheeling's council and we depended then on coal severice tax. That income is going up and should in my opinion.

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2011 Will Be Our Year -- well make that 2012 (just saying) So it looks like 2013 now - how long must this go on!
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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 5:49 pm 
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Sub,

Two things.

1. if I ever figure out the picture thingy, I'll show you the rig count in severence v non-severence states. WV was/is flat. That is changing and people are buying leases because...

2. WV is changing the oil & gas rules right now to become a bit more efficient in terms of regulations related to Oil and Gas.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 7:11 pm 
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Ralphie wrote:
PA is one of the few states that imposes no severance tax on natrual gas extraction. About 80% of the population is in favor of enacting such a tax, but our Republican governer, Tom Corbett, is adamantly in the 20%.

Correction: PA is the ONLY state that is not imposing such a tax.

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 7:16 pm 
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ZelieMike wrote:
Well, if someone can show me how to post a pdf on here that is not linked to a webphoto site, I will.

The main point is to ask what are you willing to sacrifice to give money to the state legislator coffers. Because we know two things will happen with a severence tax installed during THE EARLY GROWTH PHASES that we are in.

1. Rig count will drop and flatline - see any state where done, eg, WV
2. Local tax income will drop in favor of smaller revenue directly to PA treasury, due primarily to reduced activity.


And related, any severance tax income is more than offset, and more than doubled or more, in local and income taxes taken in by municipalities. The secondary effects.

The "environmental" issues are dealt with in permit fees, bonding, and owner/operator responsibilities already in regulation.

In short, you will end up shorting yourself at this point.

Once rig count stabilizes and the decline curves are known... not projected as now... you institute the severance tax.

In other words, don't tax during the growth phase to shut down growth. Tax during the stability phase when you won't be stealing from expansion.

this is what the successful states, like Wyoming, have done.

ZM

Baloney. What are the drillers going to do, move their operations to the Sun Belt? We're not talking about building auto plants. The gas is here, and here it will stay. I do not recommend a confiscatory level of taxes; hit the average of what other states are charging. PA gas has tremendous cost advantages over gas from other states, primarily in that it is closer to the folks who will be buying it, saving a lot of money in transport costs. The drillers are going to drill here. They have no choice. This is where the gas is.

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 Post subject: Re: Marcellus Shale
PostPosted: Wed Mar 30, 2011 7:50 pm 
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Not even close to true.

There is shale gas across the US, and across the world. If you had paid any attention at all, you would have noted that as Rendell put his moritorium's in place and worked to get the severance tax in place, rigs were LEAVING Pennsylvania to other states.

Really, do some basic research before you try to call bullshit on someone.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Thu Mar 31, 2011 12:40 pm 
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ok Mike-- I certainly defer to you expertise.

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 Post subject: Re: Marcellus Shale
PostPosted: Sat Apr 02, 2011 12:33 pm 
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ZelieMike wrote:
Not even close to true.

There is shale gas across the US, and across the world. If you had paid any attention at all, you would have noted that as Rendell put his moritorium's in place and worked to get the severance tax in place, rigs were LEAVING Pennsylvania to other states.

Really, do some basic research before you try to call bullshit on someone.

ZM

You've been reading my posts on baseball for years. You ought to have learned by now that calling me out for a lack of research is just plain stupid.

Yes, there IS shale gas across the U.S. The is about one trillion dollars worth in the Marcellus. Do you really expect me to believe that gas drillers are just going to leave it there forever, rather than pay the same price for it that they are in Texas or Arkansas?

We know how much it cost for the gas drillers to buy our governor: $900,000. What did they give you?

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 Post subject: Re: Marcellus Shale
PostPosted: Sat Apr 02, 2011 8:19 pm 
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What is that they say, keep talking and show you are the fool.

Get some facts before you start BSing.

It is very easy to walk away from the Marcellus, and drillers have. If you bother to look. They won't as long as you keep a reasonable tax environment in place, as it is now.

You keep trying to compare PA tax structure to TX and OK, which is downright laughable and shows your ignorance.

ZM

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 Post subject: Re: Marcellus Shale
PostPosted: Sun Apr 03, 2011 12:46 am 
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ZelieMike wrote:
What is that they say, keep talking and show you are the fool.

Get some facts before you start BSing.

It is very easy to walk away from the Marcellus, and drillers have. If you bother to look. They won't as long as you keep a reasonable tax environment in place, as it is now.

You keep trying to compare PA tax structure to TX and OK, which is downright laughable and shows your ignorance.

ZM

I'd have to agree with you on one thing. If my tax rate was 0%, I'd certainly consider it to be very reasonable.

http://www.post-gazette.com/pg/11090/1135961-155.stm

"Take the Marcellus Shale Coalition spokesman who reiterated that a gas severance tax is not that big of a deal.

"The Marcellus industry has been clear and outspoken on this for a year or so," said Ray Walker, vice president of Texas-based Range Resources and chairman of the Marcellus coalition. "We are willing to discuss a severance tax."

Why wouldn't they? That's just part of the cost of doing business. In Texas, Oklahoma, Wyoming and New Mexico, the tax ranges from 6 percent to 8 percent.

Still, leaving aside for a second that most people aren't generally asked if they'd be OK with a tax before they're hit with one, it's extraordinary for an industry leader to say, yeah, g'head, we don't mind if you tax us."

Just in case you don't have a map handy, I'll point out that Pennsylvania is considerably closer to the states that will be using most of this gas than Texas, Oklahoma or New Mexico, which means a considerable savings.

As to drillers refusing to drill in PA, I'm not too worried about that. There is a finite amount of natural gas in the world, and they ain't making any more of it. They're going to come here. If not today, then tomorrow. Only a total ignoramus or a representative of the gas industry would think that the citizens of Pennsylvania should give away a valuable resource for nothing, especially at a time when we have stooped to cutting the state budget for education by half a billion dollars and turning back the clock on funding our state colleges to 1984 levels. Not to mention crumbling roads, way more bridges in danger of falling down, etc., etc., etc.

So which drilling company or companies are you working for?

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 Post subject: Re: Marcellus Shale
PostPosted: Sun Apr 03, 2011 8:22 am 
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These companies aren't going anywhere now. They are too heavily invested and the production is making too much money. The only reason that there is no severance is because that's how Corbett got elected. He didn't take big contributions from the teacher's union. He took them from the gas industry.

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 Post subject: Re: Marcellus Shale
PostPosted: Sun Apr 03, 2011 2:37 pm 
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Allow me to offer some thoughts from a friend of mine who grew up in Johnstown and has lived in Pennsylvania his entire life:

Quote:
Last week the Corbett administration announced that inspectors employed by the Pennsylvania Department of Environmental Protection (DEP) to visit drilling sites and issue fines and citations for violations will no longer do that latter part of their jobs. Instead, they’ll report violation directly to the Secretary of DEP, a political appointee, who will decide on a response. What things will the Secretary consider when deciding when and when not to punish drillers? The seriousness of the violation? The frequency with which the violations occur? The amount of money the company in question contributed to the Corbett campaign (around $900 million in total from the industry)? We don’t know. The Pittsburgh Post-Gazette cleverly compared this new policy to taking the power to issue citations for traffic violations out of the hands of local police and handing it squarely to the mayor. Why not continue to let the inspectors do their job and apply the law equally across the state? Corbett’s policy has other deficiencies that I won’t bore you with.[1] You can learn about them from people more knowledgeable than me.

Consider this, however: there’s only one place in the world called Pennsylvania.[2] It is my home, and may also be yours. To the extent that Pennsylvania and Pennsylvanians can profit from the Marcellus Formation, we should, but not at the expense of our health, water, wildlife, forests, infrastructure, etc, or – in other words – not at the expense of the very things that make Pennsylvania the best place on the planet to call home.

http://zachhoover.wordpress.com/2011/04 ... o-quickly/

This is the sort of thing I was talking about regarding states that get wrapped up in the energy industry, like Louisiana. It deserves due consideration.

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 Post subject: Re: Marcellus Shale
PostPosted: Mon Apr 04, 2011 6:57 pm 
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Willton wrote:
Allow me to offer some thoughts from a friend of mine who grew up in Johnstown and has lived in Pennsylvania his entire life:

Quote:
Last week the Corbett administration announced that inspectors employed by the Pennsylvania Department of Environmental Protection (DEP) to visit drilling sites and issue fines and citations for violations will no longer do that latter part of their jobs. Instead, they’ll report violation directly to the Secretary of DEP, a political appointee, who will decide on a response. What things will the Secretary consider when deciding when and when not to punish drillers? The seriousness of the violation? The frequency with which the violations occur? The amount of money the company in question contributed to the Corbett campaign (around $900 million in total from the industry)? We don’t know. The Pittsburgh Post-Gazette cleverly compared this new policy to taking the power to issue citations for traffic violations out of the hands of local police and handing it squarely to the mayor. Why not continue to let the inspectors do their job and apply the law equally across the state? Corbett’s policy has other deficiencies that I won’t bore you with.[1] You can learn about them from people more knowledgeable than me.

Consider this, however: there’s only one place in the world called Pennsylvania.[2] It is my home, and may also be yours. To the extent that Pennsylvania and Pennsylvanians can profit from the Marcellus Formation, we should, but not at the expense of our health, water, wildlife, forests, infrastructure, etc, or – in other words – not at the expense of the very things that make Pennsylvania the best place on the planet to call home.

http://zachhoover.wordpress.com/2011/04 ... o-quickly/

This is the sort of thing I was talking about regarding states that get wrapped up in the energy industry, like Louisiana. It deserves due consideration.

Coal companies have pushed the state around for years. Now it's the gas folks. The hardest thing for me to believe it that Corbett is crying poor while he's giving away $1.4 TRILLION for nothing.

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