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Pennsylvania House Democrats Probe NatGas Incentives

A divide was evident this week at the Pennsylvania Capitol when Democratic lawmakers heard testimony from a group of experts about whether the state should continue to incentivize natural gas use, while Republican leadership continues to move forward with initiatives.

State Rep. Greg Vitali, a Democrat from Southeast Pennsylvania, organized a hearing before the House Democratic Policy Committee, which analyzes major policy initiatives. The state currently incentivizes the production and use of gas through tax credits, grants and loans.

"There is currently disagreement among those who want to combat climate change as to the role natural gas should play, and whether incentives for its production and demand are necessary," Vitali said.

After testimony from the experts, Vitali said that while he understands the need for gas in Pennsylvania's energy portfolio, he believes incentives should be directed at renewable energy and conservation measures instead. The statement stands in sharp contrast to legislation sponsored by Republican Speaker of the House of Representatives Mike Turzai, which would offer tax breaks for gas consumption throughout the state (see Shale Daily, Sept. 22, 2015).

A gulf about the positives and negatives of natural gas production and its uses in the state appears to be growing between both parties and comes at a time of increasing partisan divide.  

“This is the most partisan, politically and ideologically divided legislature in modern history,” Terry Madonna, director of the center for politics and public affairs at Franklin and Marshall College in Lancaster, PA, told NGI’s Shale Daily. “The Democrats are more liberal and the Republicans are more conservative, with a declining middle. It’s a mirror image of the electorate.”

On Wednesday, after a nine-month impasse on the state budget, which included a debate over a proposal to enact a severance tax on gas production, Democratic Gov. Tom Wolf's said he would end the gridlock and allow a $6.6 billion supplemental budget to pass without his signature. The severance tax ultimately failed, and Wolf signed a $23.4 billion stop-gap budget in December, but he vetoed $6 billion for schools and human services (see Shale Daily, Oct. 7, 2015).

"Unless Harrisburg changes its ways, they won't have adequate funds for next year," Wolf said during a press conference on Wednesday. "We are now confronted with the challenges of the 2016-2017 budget...I believe it's time to move on. The real battle is in the 2016-2017 budget. We need to get our arms around that and embrace that openly and honestly."

Testimony was mixed from a group of experts at the hearing. Denise Brinley, an assistant in the Pennsylvania Department of Community and Economic Development (DCED), said her organization is focused on expanding the use and delivery of natural gas to residential, commercial and industrial customers. She said the DCED wants to maintain the state's economic position as a net energy exporter, but ensure that "we are doing so in an environmentally friendly way." She said the state  is constantly recruiting large gas consumers to come to Pennsylvania and is working to expand petrochemical manufacturing, which is aided by incentives.

Pennsylvania Department of Environmental Protection’s David Althoff, manager of the office of pollution prevention and energy assistance, said his agency manages a number of active projects to promote the use of gas in light-, medium- and heavy-duty vehicles.

"From an emissions standpoint, it is important that natural gas vehicles funded by these programs continue to provide emissions benefits, especially when replacing an older conventional vehicle."

Michael Griffin, a public policy professor at Carnegie Mellon University, agreed and said those initiatives should go further. Incentivizing natural gas vehicles in densely populated areas, he said, could create more health benefits. "A program targeted at delivery trucks, garbage trucks and school buses to aid in switching from diesel to natural gas will likely have monetized health impacts larger than the associated economic benefits," he said.

Much of that testimony was countered, however, by others including Dan Brown of Widener University Commonwealth Law School, who said the state should be transitioning away from fossil fuels to renewables as soon as possible. Robert Howarth, an ecology professor at Cornell University told the committee that that includes shifting away from using shale gas.

"Given the role of methane in global warming, and the large emissions of unburned methane to the atmosphere as shale gas is developed, I strongly recommend that society move as quickly as possible away from using shale gas as a fuel," he said.  

Director of environmental advocacy group PennFuture's Energy Center Rob Altenburg said the state spent $3.2 billion on fossil fuel subsidies between 2012 and 2013 alone. He added that the state needs to more closely examine the benefits of such incentives with regular reviews. Mark Szybist, of the Natural Resources Defense Council and a former staff attorney at PennFuture, said the state should be focused on incentivizing energy efficiency and wind and solar power.  

Madonna, who polls on a variety of issues including energy, said that while gas has broad-based support among both voters and lawmakers, the industry’s role in the state has become politicized in recent years, primarily with the fight over how production should be taxed, but also how it should be regulated and promoted

"Those are always tied to taxpayer dollars and they've never been shown to exist on their own or deliver the jobs promised," House Republican spokesman Jay Ostrich said of renewable energy subsidies. "They're costly for taxpayers. We want to expand the use of a mass abundance of natural gas. This is not a pipe dream. These [incentives] have support not just from Republicans but labor itself has come out strongly in support. While the alternatives are nice, manufacturing jobs are in gas."

Turzai's bill, the Keystone Energy Enhancement Act, would extend local and state tax breaks to manufacturers that use natural gas or petrochemical companies that source it to create key building blocks for plastics, such as ethylene and polyethylene. The bill, designed to spur economic growth and capital investment, was introduced last year and last referred to the House Commerce Committee.

Ostrich said the bill has bipartisan support from lawmakers across the state. Tax breaks under the proposal would be offset with the additional jobs, economic activity and growth in the tax base, its sponsors have said.

The Marcellus Shale remains one of the fastest growing sources of natural gas production in the United States, rising from less than 1.7 Bcf/d at the beginning of 2010 to about 16 Bcf/d by late 2014, according to NGI's North American Shale & Resource Plays 2016 Factbook. Production surpassed 17 Bcf/d this year.

As a result of the production growth from the Marcellus, Vitali noted that during every session, legislation is introduced to provide even more incentives for the gas industry.

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