Governor Tom Wolf just completed a tour of 14 counties in northern Pennsylvania. Although the trip was billed as an opportunity for Wolf to “get out of the bubble of Harrisburg” and listen to business owners, stopping at tourist destinations and an Oktoberfest celebration along the way, it was a trip designed, at least in part, to allow Wolf to campaign for the severance tax on gas drilling that has been a sticking point in the months-long budget impasse.
Pennsylvania is the largest gas-producing state without a severance, or extraction, tax, something that has been considered a blessing to fracking opponents who don’t want to see the state become even more addicted to shale gas production. But the tax has been just as unpopular with the industry and the legislators who serve it. Discussion of a tax has been part of every budget negotiation under the two Democratic governors since fracking came to Pennsylvania, Ed Rendell and Wolf. Every time, the budget has passed without a severance tax. It appeared that things might have changed this year when the Senate voted for a revenue package that included a miniscule severance tax in exchange for pretty much gutting the state environmental agency’s permitting authority. The House isn’t having it, though, and put the brakes on the bill.
During his visit to Tunkhannock in Wyoming County, Wolf referred to $1 million in funds from the Commonwealth Financing Authority that is earmarked to bring natural gas service to the city, but is held up because of the budget stalemate. The funds would come from the Pipeline Investment Program (PIPE) announced by the administration last November.
The idea of the PIPE program is to build the “last mile” of distribution pipeline needed to connect schools, hospitals, businesses, and communities to natural gas service. The program was financed by taking $24 million from an alternative energy program the administration considered to be underutilized. It was a green building program whose advocates had pushed for the rules to be rewritten about who could qualify for the program rather than end it.
Since its inception, the PIPE program has awarded three grants. A $1 million grant went to State College-based excavation company Glenn O. Hawbaker. The company is an associate member of the Marcellus Shale Coalition and is headed by the founder’s son, Daniel Hawbaker, who contributed $7,500 to Wolf’s gubernatorial campaign. Another $1 million was awarded to Domtar Corporation to build a three-mile pipeline to its paper mill. Leatherstocking Gas Company, LLC received $442,724 to provide gas service to the town of Montrose and Bridgewater Township in Susquehanna County.
Although the natural gas industry has a strong presence in northern Pennsylvania – 4,873 of the 10,674 unconventional wells drilled in Pennsylvania are in 13 of the 14 counties Wolf toured – the gas extracted there is exported out of the area. That was the case in Montrose and Bridgewater Township before Leatherstocking came on the scene and it is the case in Tunkhannock.
With only 269 wells in the ground, Wyoming County is far less impacted than Susquehanna County where 1,405 wells have been drilled. However, a 2013 well failure in Tunkhannock released thousands of gallons of fracking fluid. Several families were evacuated from their homes and wetlands were contaminated. Earlier this year, a Chief Oil and Gas well pad caught on fire. The controversial Atlantic Sunrise pipeline would also run through the county.
In May, the Wyoming County Chamber of Commerce announced it had applied for a $1 million PIPE grant to build the pipelines needed to serve Tunkhannock. It’s the same $1 million Wolf dangled like a carrot during his visit last week. Northern Pennsylvania is a Republican stronghold and most Republicans abhor the severance tax. All of Wyoming County is represented by a single state representative, Republican Karen Boback. She has been more publicly supportive of a severance tax than her Republican colleagues have been, so Wolf may view her as being persuadable.
In 2010, Boback issued a statement on the severance tax. “I was prepared to vote in favor of a natural gas severance tax, but as written, this legislation will not have the desired benefit for the region of this Commonwealth where drilling is taking place,” she said. “An overwhelming majority of the revenue collected from this tax would go straight into the General Fund, leaving the communities in the Marcellus Shale region wanting. This legislation will not protect our local municipalities, which will take the brunt of the drilling impact.”
It’s hard to say if helping to free up funds for the natural gas service Tunkhannock has wanted for several years would be enough of an enticement to win Boback’s vote. After all, the budget will be settled eventually, with or without a severance tax, and the Wyoming Chamber of Commerce will surely be awarded the $1 million either way.
To build the pipelines in Susquehanna County, Leatherstocking matched the funds awarded, a requirement of the PIPE program. In 2012, the Public Utilities Commission voted unanimously in favor of making Leatherstocking, a 50/50 partnership between Corning Gas Co. and Mirabito Holdings Inc., the first new utility in Pennsylvania in decades, allowing it to deliver gas to customers. In other words, the company building the pipeline and receiving a state grant to do it, also owns the delivery business. Then-PUC Chairman Robert Powelson considered it a “win” for businesses and residents. (He was recently approved by the U.S. Senate to serve on the Federal Energy Regulatory Commission where he will likely be as enthusiastic about the pipelines and liquefied natural gas export facilities he is charged with reviewing.)
The Tunkhannock project will work much the same way, except UGI is the company putting up the other half of the money and building the pipelines. The company operates a program called GET Gas. GET stands for Growth Extension Tariff. UGI Utilities’ Director of Business Development Dan Brominski told The Wyoming County Press Examiner that three criteria must be met to qualify for the program. First, the total cost must exceed $15,000. Second, UGI would get more than 50 percent of the market share. Third, the customer cost must be less than $10,000. The last one was a problem for UGI. “Tunkhannock did not pass here,” Brominski said, “so we went to the Chamber and elsewhere to see if grant monies might be available.” They found them in the PIPE program.
Nowhere in the guidelines for PIPE does it say that public utilities qualify for grants. The list of eligible applicants includes economic development organizations, businesses, municipalities, hospitals, and school districts. Public utilities are businesses, of course, some of them privately-owned businesses. Nevertheless, giving Domtar a grant to build a pipeline to its paper mill seems to be an appropriate allocation of funds as the program is defined. Giving Leatherstocking and, using the Chamber of Commerce as its proxy, UGI taxpayer-funded grants to expand their customer base seems far less legitimate. In the case of UGI and its GET Gas program, the customers also “share the cost of the facilities” by paying $44.90 per month for ten years or a lump sum payment of $3,177.
Wolf is using the alternative energy fund-robbing PIPE program that is using taxpayer dollars to help already wealthy gas companies attract new customers to build pressure on Republican legislators to pass a revenue package that establishes a puny severance tax in exchange for an evisceration of the Department of Environmental Protection that only serves to make gas companies richer and less accountable. To what depths will he go next?