Voodoo Economics of the Marcellus Shale Gas Field

by Duane Nichols on October 4, 2015

Blue Line -- Jobs in WV

Supply-side (Trickle-down) economics and regulations unfairly favor oil & gas

Commentary by S. Tom Bond, Jane Lew, Lewis County, WV

Voodoo economics is famous as the economics of Ronald Regan. He was a sports announcer and then actor by training and experience. Regan was a liberal and union leader at first but became a “conservative” later. Doubtless he could have argued any position he wished.

George H. W. Bush famously used the term “voodoo economics” in his 1980 bid for presidential nomination, implying a policy that wouldn’t work – was cut loose from reality. Subsequent experience proved Bush right.

Economics is the theory of business finance, but unlike physical science, conducting controlled experiments is usually not possible. The economist must figure out causes from what happens in real life after it happens. Simple mathematical relations such as those of physical science are almost never proven, so economics has schools reminiscent of religions. Economics cut loose from reality is not rare.

For businessmen, the objective is to convince other people with money or power to let the story teller take some initiative. Such is the nature of the extractive industries, including shale drilling. In short, people judge on the basis of how good the story is, rather than going to the labor of finding out if that story is connected with reality. Some have the connection of a summer breeze to a forest – the breeze blows through with little effect. Afterwards such fine stories are seldom checked, because nothing can be done then. The practice is – if it “works,” use it. If it doesn’t, try something else.

So what about shale drilling? What is left out? Let’s begin with subsidies. These include tax breaks and giveaways, research for the energy production, certain regulations that are favorable, restrictions on exports or exemptions from restrictions on imports.

All fossil fuel industries in the U. S. are subsidized to the extent of $37.5 billion annually, according to one source. Even further subsidies have been proposed in Congress but voted down. Across the world the subsidy amounts to $775 billion to $1 trillion.

This includes the following:

>>> Expensing intangible drilling costs: Since 1913, this tax break has let oil companies write off some costs of exploring for oil and creating new wells. When it was created, drilling meant taking a gamble on what was below the earth without high-tech geological tools. But software-led advances in seismic analysis and drilling techniques have cut that risk down.

>>> Deducting percentage depletion for oil and natural gas wells: Since 1926, this has given companies  tax breaks based on the amount of products extracted from its wells.

>>> The domestic manufacturing deduction for oil and natural gas companies: In 2004, American manufacturing was being ravaged by China’s entrance on the global scene. But, the refining process  involves high-tech manufacturing, so there was never any danger that either drilling or refining was going to migrate overseas.

The expense on research and development of fracking was more than $100 million over a course of 20 years. A lot of it was done in Morgntown, WV, in the Eastern Gas Shales Project. Much of the experience of George Mitchell, who is given credit for the first successful well, is told by his geologist, Dan Steward. Details are here. (Note: The “Breakthrough.org” is a pro-industry site.)

The ultimate example of favorable regulation is the Energy Act of 2005, also known as the “Halliburton Loophole.” It was Dick Chaney’s baby, when he was able to exert undue influence on government while George Bush II was president. It exempted oil and gas from many regulations that restrict other industries although O&G are larger, with a vast number of locations dispersed over a significant part of the United States.

The O & G industry is exempt from: the Clean Water Act, the Safe drinking Water Act, the Clean Air Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act, the Toxic Release Inventory under the Emergency Planning and Community,    Right-to-Know Act, and the Comprehensive Environmental Response, Compensation, and Liability Act, otherwise known as the Superfund Act.

You just have to stand back and say ‘Wow!” to that list. Just where is the interest of the citizenry in that? Nowhere! Not now nor in the future.  The oil and gas industry has set up some big long term problems, too, given the aging oil and gas pipelines all over the country.

Furthermore, federal regulation of fracking is forbidden. The individual states can regulate fracking, but are faced with limited know-how, limited funds to operate regulatory agencies, and the influence of lobbying by national and international corporations.

Then there is the big complaint of residents in shale areas of externalized damage – damage the industry doesn’t pay for. Property devaluation – what do you think a well pad, access road and attendant pipelines does to property value? It can ruin the small property owner, and hurts the large landowner.

Also, there are road damages, courthouse expenses, extra policing and other public expense. Then there are damages to citizen health. There are 16,719 entries on the List of the Harmed published by the Pennsylvania Alliance for Clean Water and Air, as of August, this year. Some of the entries involve as many as 30 individuals. One can be sure that is a minority of those harmed, most remain quiet. You have to do a search to understand the number and variety of health problems caused.

If water sources are destroyed, there is little accountability by many companies. For example, two public drinking water systems have been impacted and at least six private water supplies allegedly contaminated due to ongoing pollution being caused by a natural gas fracking operation of JKLM Energy in Potter County, Pennsylvania.

When water buffalos are put out after fracking destroys an aquifer, they are usually abandoned when the drilling company leaves.

All those Jobs? “The development of the Marcellus Shale has led to a boom in West Virginia’s natural gas production. But aside from the increase in drilling activity and state and local tax revenue, the natural gas boom has not brought with it the jobs and economic growth that many predicted. While the state’s natural gas production has increased dramatically over the past several years, West Virginia has lagged behind the rest of the country in terms of job growth and fewer West Virginians are employed today than before the boom. Even in the counties where production has increased the most, job growth has been lackluster.”

Further economic news: “US shale producers lost more than $30 billion during the first half of 2015, as the prolonged slump in oil prices takes its toll. Bankruptcies and restructuring are on the rise as independent oil and gas companies do what they can to survive. Data company Factset reports that capital spending exceeded cash from operations by about $32 billion in the first six months of the year and is quickly approaching the deficit of $37.7 billion reported for the whole of 2014.

“Cutting the fat: A slump in oil prices is forcing the oil and gas services industry for the first time in 15 years to trim costs in a way that executives say will create a lasting change away from their usual lavish way of doing business. (9/12)

“Costly sales: Some U.S. oil producers are trying to sell parts of their lucrative saltwater disposal businesses in a sign that cheap crude is already forcing cash-starved companies to sell assets so oil can keep flowing.”


Fasting to Oppose New Pipelines & LNG Terminals

The 18 Day Fast at FERC Comes to an End, Deemed Successful

From an Article by Ted Glick, EcoWatch.com, September 29, 2015

There were many kind people, including some Federal Energy Regulatory Commission (FERC) employees, who thanked me or had supportive things to say during the 18 days that I fasted on water only in front of FERC with 11 other sisters and brothers from September 8 – 25.

The Beyond Extreme Energy-organized “Fast for No New Permits” was not explicitly about “unity.” It was the latest in a now-over-a-year campaign focused on what we call “the most dangerous federal agency most people have never heard of.” We are doing everything we can think of to throw a nonviolent wrench into the gears of the FERC machinery. This semi-independent agency has just kept grinding out permit after permit for the expansion of fracked gas infrastructure, with virtually no rejections of gas industry proposals, from what we’re able to tell, for many, many years.

The idea of doing a serious fast emerged a few months ago as some of us realized that the Pope was going to be in DC in late September, the Pope who has been outspoken about the need for action on the climate crisis and who, yes, had no problem being photographed a couple years ago with that “No al Fracking” sign.

And so on September  8, the day after Labor Day, 12 of us, from ages 19 to 72, began a diet that consisted of water, salt and potassium. Ten of us continued on that diet until the 25th, the day after the Pope’s speech to the U.S. Congress.

There were at least 100 other people who fasted around the country, including several who fasted for 18 days also, as I understand it, in Oak Flat, Arizona, protesting federal plans to take land in Tonto National Forest sacred to local Apache nations and give it to multinational copper companies to mine.

In DC we 12 fasters and other supporters set up camp in front of FERC on the sidewalk every work day from 7 a.m. to 6 p.m. We passed out many thousands of leaflets and had hundreds of conversations with FERC employees and people passing by. Dutch TV came by and did interviews, as did a dozen or more other press outlets. We found a great deal of support and almost no overt hostility.

One of the more interesting conversations we had was with Norman Bay, chair of FERC. I was able to talk with for a few minutes when he was spotted coming out of the FERC building while most of us on this very hot, sunny day were across the street in the shade of a 30-foot high stone wall. Little of direct substance came out of that discussion, though you never know.

On the 17th day, the day the Pope spoke to Congress, we had a breakthrough with the Washington Post when a reporter interviewed me on the mall and posted a blog about it that morning. The next day that blog post became a substantial part of a good and prominent article in the first section of the paper, taking up 2/3rds of a page and with a big picture. It was helpful to see that Post article reporting that our fast was “to protest what he said was the Federal Energy Regulatory Commission’s support for the use of fossil fuels and pipelines.”

I would expect lots of FERC employees, including Commissioners, as well as DC judges who will be hearing appeals of FERC’s rubber-stamping ways, see that article and smile.

There is no question this was an effective action. But it was more than that. In significant part because it was a fast—what Gandhi called “the most sincere form of prayer”—and connected to the visit of the people’s Pope, it was also, indeed, about unity.

I lost 30 pounds over those 18 days. It is good to be eating again, slowly returning to normal eating habits. It is good to have energy to work, feel my strength beginning to return, to taste the delicious flavors of fruits and vegetables, the only things I am eating these first two days of my back-to-normal-eating, nine-day plan. It is good to be home after three weeks away.

And it is good to know that the memories of those 18 days and the wonderful community of sister and brother fasters and supporters will be with me always, nourishing my commitment to keep taking action for a stable climate and a transformed world until the day I die.

Ted Glick is the National Campaign Coordinator of the Chesapeake Climate Action Network and one of the fasting protesters at FERC.

Ted Glick, CCAN & BXE

See also: Chesapeake Climate Action Network

See also: Beyond Extreme Energy “BXE”

“The gift of the Earth with its fruits belongs to everyone.” — Pope Francis, Laudato Si’, paragraph 71.


FERC Needs a Consumer Advocate to Represent the Public Interest

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Add Your Voice to Urge FERC to Secure a Consumer Advocate We, the undersigned, call on the Federal Energy Regulatory Commission (FERC) to create an Office of Consumer Advocate and Public Participation along the following principles: >>> The office should be organized in a way to maximize independence. Financing for the Office should be clearly [...]

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Comment Period on Selenium Standard Extended to October 10th From: Appalachian Voices . . . . Dear Friend of the Mountains, Date: September 28, 2015 The U.S. Environmental Protection Agency has extended the public comment period on a critical decision for the health of Appalachia’s waterways and aquatic life. Take action now and tell the [...]

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Pipeline Awareness for Emergency Response in WV

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Stone Energy Shuts-In Marcellus Well Field in Wetzel County

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Stone Energy Curtails Nearly All Appalachian Production on Low Prices From an Article by Jamison Cocklin,  NGI News, September 26, 2015 Stone Energy Corp. has shut-in its largest field in the Appalachian Basin, curtailing between 100 and 110 MMcfe/d of Marcellus Shale production to offset low commodity prices and negative differentials that had reached “unacceptable [...]

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“Carbon Risk” Economics is Bringing on Fossil Fuel Divestment

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Divestment efforts starting to hit coal and oil & gas firms From an Article by Shawn McCarthy, The Toronto Globe and Mail, Canada, September 25, 2015 Pension funds and other institutional investors are growing wary of an increasing “carbon risk” faced by coal and oil companies which confront a divestment movement that has gone mainstream [...]

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Ocean Rise Already Accelerating at Surprising Rate

September 26, 2015

World’s Oceans Could Rise Higher, Sooner, Faster Than Most Thought Possible From an Article by Jon Queally, Common Dreams, July 21, 2015 New research shows that consensus estimates of sea level increases may be underestimating threat; new predictions would see major coastal cities left uninhabitable by next century. If a new scientific paper is proven [...]

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Fracking Chemicals Can Cause Endocrine Disruption and Illness

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Fracking Chemicals Can Cause Endocrine Disruption and Illness, Says Study From an Article by Jan Lee, Triple Pundit, September 21st, 2015 There is mounting data to suggest that hydraulic fracturing (fracking) can have adverse affects on the environment. A new study, however, suggests that populations living close to fracking sites also have a higher incidence of health [...]

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