Pennsylvania policymakers should "watch the rigs" as they make decisions, Marcellus Shale Coalition (MSC) President Kathryn Klaber told a Pittsburgh audience Thursday.
"The immediate choices that companies are making right now will determine these longer-term trends that will define what are the economic, what are the environmental and what are the energy security benefits that we can reap from this opportunity," Klaber said at the Energy Inc. Conference hosted by the Pittsburgh Business Times.
She said the natural gas industry in Pennsylvania cannot only accept a "competitive" impact fee but actually wants one to get economic certainty (see Shale Daily, Oct. 4).
The choices before companies are not only between the Appalachian Basin and other regions, but between the Pennsylvania Marcellus and the Ohio Utica and even within the Marcellus, Klaber said. With natural gas at about $4/Mcf, but liquids more valuable, companies in the dry gas region of northeast Pennsylvania face different economic decisions than companies in the wet gas region of southwestern Pennsylvania, she said.
"The rigs in our part of the state are more likely to stay right where they are, but in the northeast many companies need to think about the capital deployment in a lower natural gas price environment," Klaber said. "So it's a business decision."
Even though the corporate income tax in Pennsylvania is higher than many other states, the lack of a severance tax until now has attracted investment, Klaber said. That will likely change in the months ahead as Pennsylvania Gov. Tom Corbett recently proposed an impact fee on natural gas development (see Shale Daily, Oct. 5).
The MSC supports any fee that "preserves the commonwealth's competitive advantage here versus other shale states," but it also wants to see Pennsylvania standardize the "patchwork" of local drilling ordinances from municipality to municipality. "Frankly, I think there has been an amazingly disproportional amount of attention put on the tax and fee issue relative to the many factors that come into those business decisions," she said.
Corbett's proposal "just makes more proposals on the table, and uncertainty is alive and well in the regulatory and legislative climate in Pennsylvania," Klaber said.
Pennsylvania policymakers should look to Alberta, Canada, where changes to the fiscal regime in 2007 pushed companies to neighboring provinces, she said. "This is an important time to realize that public policy decisions affect the businesses," she said.
While current Utica Shale activity pales in comparison to the Marcellus, Klaber said she expects development to unfold more quickly in Ohio than it did in Pennsylvania because Ohio, for instance, doesn't have the local ordinance issues facing Pennsylvania.