Philly Seeks to Capitalize – June 27, 2015

Today we talk about five things in the news for the week of June 20, 2015:

  1. Pennsylvania Hurtles Towards Energy Tax Drama
  2. House Passes Rebuke to Powerplant Regulations
  3. All Kinds of Noise on LNG Exports
  4. EDF Has New Study on Methane
  5. Israel Making Deals to Slay the Leviathan

And our interview is with Trish McFarland, the President of the Delaware County Chamber of Commerce.

Click below to listen or find us on iTunes or Stitcher.

 1.  Pennsylvania Hurtles Towards Energy Tax Drama

Pennsylvania’s new Governor, Democrat Tom Wolf, ran on an agenda that really focused on the idea of imposing a new 5% tax on natural gas extraction.  The previous Governor, Republican Tom Corbett, had avoided imposing a tax.  Instead, he had opted for a per-well impact fee that was more friendly to the industry and did not send much money back to the state.  Taxes on natural gas was a big issue in the campaign, and it is safe to say it was a winning issue for Gov. Wolf.

Reality set in after the election, however.  Pennsylvania has a heavily Republican legislature that is not in the mood to increase taxes.  So, the Governor really only has one good card to play, and he played in on Saturday, June 27,  by threatening to veto the budget for not including the new severance tax.

Republicans pretty much ignored the threat and passed their budget without any tax increases, as PennLive reported:

Republicans defended their proposal highlighting that it includes increases in funding for education, agriculture programs, veteran programs and health and human services. The proposal, they said, also does not include tax increase….

The proposal will now be sent to the Pennsylvania Senate on Sunday. The Senate will have to wait three days before they can vote on it. Tuesday, the deadline for the budget, is the first day the Senate can vote on the proposal.

Republicans also pulled a trick that has become popular at the federal level.  They offered up Gov. Wolf’s budget as an amendment, and it received zero votes.  Republicans repeatedly laid into this issue.

Gov. Wolf was not impressed, and back and forth the fight went on twitter:

All signs seem to point to a partial government shutdown on Tuesday.  The Post-Gazette reports it might not be as bad as you would think:

…thanks to court rulings saying state employees who are working must be paid, and outsourcing of certain government services, budget standoffs are far less disruptive than in years past, said Tony May, who worked in the Shapp and Casey administrations….

“It always seemed to me to be an overblown argument that if the budget isn’t passed by June 30 it’s some black eye for the whole process,” said Mr. Manzo, who added that most average citizens care more about what is in the budget.

2.  House Passes Rebuke to Powerplant Regulations

For the past few years, Republicans have struggled with their critique of the President’s Clean Power Plan regulations for greenhouse gas emissions from powerplants.  Last week, House Republicans passed their response bill, the Ratepayer Protection Act.  The bill passed basically along party lines.  It has two components, as explained by its sponsor Rep. Ed Whitfield (R-KY):

  • Given the considerable legal challenges to EPA’s proposal, the legislation would allow for completion of all judicial review of any final rule before requiring states to comply with the implementation deadlines of the proposed rule.
  • The measure also ensures that a state would not be forced to implement a state or federal plan if its governor finds it would have significant adverse impact on ratepayers or reliability.

The debate on the floor was fairly muted.  For the most part, it was Members from the House Energy and Commerce Committee rehashing arguments they have made during committee action on this bill.  A couple new voices did weigh in.

Rep. Mimi Walters (R-CA) argued the Clean Power Plan will drive up electricity costs.

Rep. Earl Blumenauer (D-OR) argued that the whole U.S. needs to take action to reduce emissions, as his hometown of Portland has done.

The bill is now officially dead in the Senate.

3.  All Kinds of Noise on LNG Exports

There was a huge amount of noise last week on liquefied natural gas exports.  First up, the Congress passed legislation requested by President Obama that should help him negotiate free trade agreements with countries in Europe and the Asia Pacific.  That should be great news for natural gas, as export policy favors free-trade-agreement countries.  The details of the agreements are being negotiated, but the bills that were passed are taken as a step in the right direction by industry groups like America’s Natural Gas Alliance:

ANGA applauds Congress on the bipartisan passage of Trade Promotion Authority. This much needed measure is a win for the American economy….The United States is a leader in energy production, and this legislation will help us to export a portion of our nation’s abundant and clean natural gas to new markets abroad and make America more energy secure.

The Department of Energy also approved another export project last week.  The way the process is working now, the DOE is only approving exports by projects that have completed the costly permitting process by the Federal Energy Regulatory Commission.  The company that jumped out first, Cheniere Energy (also the owner of Sabine Pass) now holds the rights to more than half the permitted export volumes.  That could be important, as the DOE has permitted 9.99 billion cubic feet per day (Bcf/d) of exports and ominously repeats the number 12 Bcf/d in each order:

We find that the intervenors, commenters, and protestors in this proceeding have failed to overcome the statutory presumption that the proposed export authorization is consistent with the public interest….

With the issuance of this Order, DOE/FE has now issued final non-FTA authorizations in a cumulative volume of exports totaling 9.99 Bcf/d of natural gas, or 3.646 Tcf/yr, for the eight final authorizations issued to date—Sabine Pass (Trains 1-4) (2.2 Bcf/d); Carib Energy (USA) LLC (0.04 Bcf/d); Cameron LNG, LLC (1.7 Bcf/d); FLEX I (1.4 Bcf/d); FLEX II (0.4 Bcf/d); Dominion Cove Point LNG, LP (0.77 Bcf/d); Cheniere Marketing, LLC and Corpus Christi Liquefaction, LLC (2.1 Bcf/d); and this Order (1.38 Bcf/d). This total export volume is within the range of scenarios analyzed in the 2012 EIA and NERA studies. NERA found that in all such scenarios—assuming either 6 Bcf/d or 12 Bcf/d of export volumes—the United States would experience net economic benefits….

DOE/FE will continue to assess the cumulative impacts of each succeeding request for export authorization on the public interest with due regard to the effect on domestic natural gas supply and demand fundamentals.

Additionally, the Senate Foreign Affairs Committee held a hearing on “American Energy Exports: Opportunities For U.S. Allies and U.S. National Security.”  This Committee is led by Sen. John Barrasso (R-WY), who has been very aggressive on energy exports.  In fact, most Senators are starting to express a desire to help U.S. allies.  Sen. Mark Udall (NM), a Democrat and popular environmentalist, spoke favorably about exports at the hearing.  Sen. Cory Gardner (R-CO) continued to share his experience with ambassadors lobbying him for exports.  Exports still have strong critics.  Sen. Ed Markey (D-MA) is says exports will drive up U.S. prices and not even go to the countries America wants to help.  Republicans like Sen. Barrasso counter that by saying every molecule on the open market helps every purchaser regardless of where each molecule happens to go.

One last note, Speaker of the House John Boehner apparently toured a Lithuanian LNG terminal today.

4.  EDF Has New Study on Methane

The Environmental Defense Fund has done a number of studies on the environmental impacts of the shale boom, often collaborating with industry along the way.  Last week, they put out a study that “Quantifies Natural Gas Loss from Production on U.S. Public and Tribal Lands.  Here are some of the big findings:

  • Oil and gas companies operating on federal and tribal lands are losingenough natural gas each year through leaks and intentional venting and flaring equal more than$360 million at current market prices. This is enough natural gas to meet the heating and cooking needs of 1.6 million homes.
  • Companies are usually not required to pay royalties when natural gas extracted from federal lands is lost prior to the production meter. Natural gas losses on federal lands in 2013 had a value of $32 million in taxpayer royalties, based on gas at $4/Mcf and a 12.5% royalty rate.
  • New Mexico and Wyoming waste the most natural gas.

Just to put that in context, however, Government Accountability Office numbers show the lost royalties are not very large in the big picture.

Federal oil and gas resources provide an important source of energy for the United States; create jobs in the oil and gas industry; and generate billions of dollars annually in revenues that are shared between federal, state, and tribal governments. Interior reported collecting approximately $48 billion from fiscal year 2009 through 2013 from royalties and other payments companies made. This makes oil and gas resources one of the federal government’s largest nontax source of revenue.

5.  Israel Making Deals to Slay the Leviathan

Israel is a minor producer of natural gas with some big dreams.  As a recent paper by the Brookings Institute explains:

In recent years, major natural gas fields were found in Israel’s exclusive economic zone (EEZ). These discoveries have the potential to transform the Israeli energy outlook, enabling the country to diversify its energy sources. Moreover, the discovered volumes of natural gas could theoretically enable regional energy cooperation in the Eastern Mediterranean. Yet, it is still uncertain whether these gas finds can effectively benefit Israeli and regional stakeholders.

Last week the government made some big moves to get more gas flowing.  According to the Times of Israel:

On Thursday, ending months of legal obstacles, a government committee approved a plan to allow America’s Noble Energy and Israel’s Delek Group access to Israel’s Tamar and Leviathan offshore reserves, despite being branded a de facto monopoly by the anti-trust commissioner last year. Noble-Delek also own two smaller reserves discovered recently.

The firms have been selling gas to the Israeli market from the Tamar field, which went online in 2013, and have agreed to sell to neighboring countries as well. The Leviathan field, the largest gas field in the Mediterranean, has not yet been developed

Under Thursday’s deal which was approved by the security cabinet, Delek must sell its entire share of Tamar, and Noble Energy must sell most of its holdings within six years. Delek must sell its holdings in two smaller gas fields within 14 months…

But critics say the deal might in fact strengthen the gas monopoly, because the companies will maintain a de facto monopoly over the Tamar field for the next six years before entering a similar partnership to develop the Leviathan field.

The deal drew some backlash, though:

Responding indirectly to the Haaretz report, Netanyahu wrote on Facebook, “I do not work for any tycoon – I’m the prime minister of Israel and I work for you, for the security of the State of Israel and the welfare of all of its citizens. During the election I pledged to work to reduce the cost of living. I am determined to do this through the many resources we will gain through [implementation of] the gas draft. The draft dismantles the monopoly and will bring over the coming decades hundreds of millions of shekels for education, welfare and health for all the citizens of Israel.”

On Saturday evening, thousands of protesters marched in Tel Aviv against the government’s handling of offshore gas reserves, blocking roads and chanting slogans, sparking low level clashes with police.

At least four people were arrested during the protest, according to Hebrew media reports, as crowds marched through central Tel Aviv, blocking the Maariv flyover at one of the city’s main junctions after midnight.

Interview with Delaware County Chamber President Trish McFarland (Starts at 28:03)

Trish recently returned to the place she started her career, only now she is the boss.  She grew up in Delaware County and stayed nearby for college, attending West Chester University in West Chester Pennsylvania.  Her family was active in politics and she says that helped her understand the importance the public sector in making things work.

She earned her degree in Political Science and Public Management and did a brief tour of duty with the Chester County Chamber of Business and Industry.  She quickly found an opportunity to move back to Delaware County to work at their Chamber of Commerce as an events coordinator.  She stayed for nine years, eventually moving up to be the Vice President of the Chamber.  At that time, it was run by a part-time President, so Trish was managing day to day operations.

Trish eventually wound up stepping away from the Chamber for a few years.  She worked with the Delaware County Transportation Management Association, a nonprofit aimed at improving transportation in the county.  She also spent time in the Delaware County Office of Workforce Development.  This March, returned as the President of the Chamber of Commerce.

She has an aggressive agenda for her time as President.  She aims to bring some new life to the Chamber, reinvigorate its programs, and bring awareness to its work.  One thing she finds herself reminding people is that the Chamber is not government funded.

Delaware County is a suburb of Philadelphia, but it is very rural in some parts.  So the businesses in the county run from urban areas, to suburban areas, to rural areas.  Trish runs the only Chamber of Commerce for the county, and that means she has to represent the interests of all those different areas.  The county has big companies like SAP and Boeing, plus a lot of oil and gas industry, and plenty of mom and pop shops.

Delaware County

 

Delaware County sits right near the Philadelphia Naval Shipyard.  For over a hundred years, it was a very important location for the U.S. Navy, but operations wound down  in the 1990s.  That closure, along with the early 2010s closure of a nearby ConocoPhillips  refinery, cost the area a lot of jobs.  Trish said that everybody in the county new somebody that lost a job in the yard.  Today, the Navy Yard is in the midst of a comeback as a government-run industrial park.

Trish underscored the fact that Delaware County sits right on the Delaware River and is working to expand its own Marcus Hook Industrial Complex.  In 2012, Delta Airlines purchased the closed ConocoPhillips refinery and began using it to produce jet fuel for the airline, though its subsidiary Monroe Energy.  Delta has invested a lot of money into the plant and created a lot of new jobs.  Now, Sunoco hopes to expand its operation at Marcus Hook expanding their refining of natural gas liquids, namely propane, butane, and ethane.

The success of the Sunoco plant will require a steady supply of natural gas liquids from the Marcellus Shale.  That is one of several reasons Trish published an editorial in the Philly.com news site saying:

Southeastern Pennsylvania is on the cusp of exciting growth with the revitalization of the Marcus Hook Industrial Complex as part of the proposed Mariner East liquid-natural-gas pipeline. With this investment, the Delaware River could become the new hub for the Northeastern United States as a source of clean, abundant, affordable energy…

The $3 billion Mariner East natural gas liquids (NGLs) project by Sunoco Logistics will carry products that are essential to our state and national economy. These products help heat and cool our homes, and power both factories and small businesses, all of which we hope will see increased economic activity. Moving NGLs from the fields of Western Pennsylvania to the Marcus Hook Industrial Complex will bolster future development and, in particular, local manufacturing.

To bolster that effort, the Delaware Chamber has joined with a number of business and labor groups to form the Pennsylvania Energy Infrastructure Alliance.  The group is supporting timely approval of critical energy infrastructure.  Trish says the private investment in pipelines is strengthen the economy, create jobs, and improve safety.  Governor Tom Wolf in the process of creating a Pipeline Infrastructure Task Force that will seek to “achieve a world-class pipeline infrastructure system” and the Infrastructure Alliance members have applied to participate.

Workforce development is a major focus for Trish and the Chamber.  She says the people of Delaware County are generally supportive of infrastructure development, and the county is also filled with technically-skilled workers.  Both Delaware County and neighboring Chester County have strong community colleges.

You can learn more at: www.delcochamber.org for the Chamber itself and www.paallianceforenergy.com for the new Infrastructure Alliance.