Update on Post about PA Natural Gas Exports

Stream Hugger's post from July 9, 2013, explained how the Corbett administration has enacted laws that clearly favor natural gas drillers, often at the expense residents of the Commonwealth and often those Pennsylvanians who lease their land to drillers for gas exploration or production.  In that post, I cautioned against exporting PA's natural gas oversees because loss of that supply to our domestic market could drive up costs to American consumers.

Two days ago I came across a story from Pittsburgh's Tribune-Review that told of some unwelcome consequences for a few western PA landowners resulting from Sunoco's impending construction of a pipeline to transport natural gas from western PA to a port on the Delaware River south of Philadelphia.  It seems that lawyers for Sunoco Logistics Partners LP discovered a loophole that will allow the company to take private land that they need for their pipeline route by eminent domain.  Why can a corporate giant like Sunoco Logistics Partners force a landowner into selling their land against their will?  In this case, the natural gas export facility will be in Marcus Hook, PA, located on the Delaware River, which has had a fair amount of overseas shipping traffic since the Swedes first took over the native Lenni Lenape village at that location in the 1640s.  As can be seen on the aerial photo below, only the northeastern corner of Marcus Hook is residential.  Most of the borough was occupied by the former Sunoco oil refinery for several decades until only a couple of years ago.  Then Sunoco Logistics Partners bought the former refinery from their parent company to convert it to a major export hub for natural gas.

Marcus Hook, PA (screen shot from Google Maps).

The loophole that allows Logistics Partners to use eminent domain to take whatever property they need for their pipeline route is available because this particular pipeline route from Western PA to Marcus Hook, PA, will cross a state line, making it subject to federal interstate commerce laws.  As you can see in the aerial photo, the Sunoco plant actually straddles the state line with Delaware, and the last one-half mile of the route will be in Delaware.  How convenient for Sunoco Logistics Partners, and how unfortunate for PA landowners in the path of the planned pipeline.  But we cannot blame this situation on the Gov. Corbett's need to pay back the $1 million in campaign contributions that he received from the natural gas industry.  This law was already on the books.

The bottom line here is that Sunoco Logistics Partners will be looking to export as much of PA's natural gas as they are able to load onto outbound ships.  Like I said in my post a couple weeks ago, as more gas leaves the domestic market, the greater risk we domestic users have for losing the low natural gas prices we've been experiencing recently and the less likely we will see a major shift to cleaner-burning natural gas vehicles.  So we will still be dependent on foreign petroleum.  The politicians who sold us on bending over backwards to accommodate natural gas drilling faster than appropriate regulations could be enacted must be held accountable for allowing the U.S.'s energy independence to be shipped overseas.

Stormwater Dischargers May Soon Have to Pay in PA

Two weeks ago, Pennsylvania took a huge step forward to empower its municipalities to better manage stormwater with the signing into law of Senate Bill 351, which amended the Commonwealth’s statutes governing municipalities to specifically allow the creation of municipal stormwater authorities (MSAs).

A handful of municipalities in PA have already created MSAs, but there have reportedly been several more municipalities that have considered creating MSAs but have been reluctant to do so in the absence of a statute explicitly authorizing such bodies.  This legislation provides that authorization for creation of MSAs that are empowered to finance, build, maintain, and operate municipal stormwater projects and infrastructure. This authorization would include assessing usage fees.

Local governments in Pennsylvania have needed additional tools to help them address the escalating costs of managing stormwater to address both flooding problems and regulatory requirements for surface water quality.  I’ve read about complaints from many smaller municipalities about unfunded mandates from both the Pennsylvania Department of Environmental Protection (PADEP) and the U.S. Environmental Protection Agency (EPA).  And it is understandable that a second-class township in Pennsylvania might not have the budget to take on ambitious stormwater management projects without significant tax increases to their residents.  This newly passed legislation expressly allows municipalities in PA to create municipal stormwater authorities to deal with PADEP and EPA stormwater mandates.

Establishing an MSA would help create a stable source of funding for municipal stormwater management planning and infrastructure and even for flood mitigation projects.   MSAs can assess property owners that discharge stormwater to public infrastructure or to surface waters of the Commonwealth based on the volume of stormwater they discharge.  These MSA usage fees would provide incentives for private property owners to install and maintain stormwater management infrastructure on their own properties, thus reducing costs to local governments and taxpayers for managing runoff from larger private tracts.  The United States Geological Survey estimates that, in urban areas, impervious surfaces (parking lots, sidewalks, and buildings) account for 53.9% of the surface area.  That means that, in urban areas, less than half of the land surface is available to allow stormwater to infiltrate into the ground.  Therefore, appropriate controls must be in place to prevent oil, grease, and debris from being washed into surface waters with stormwater runoff from these extensive urban and suburban impervious surfaces.

To put this into proper perspective, about two years ago PADEP initiated a requirement that new development projects (post-construction) must manage all of their stormwater on-site for any storm events up to 2-year storms (in other words, storms in which the maximum rainfall statistically would occur only once every 2 years).  Developers don't like having to build large stormwater retention basins, because these structures take up land that they would otherwise build on or pave over (creating even more impervious surfaces).  The on-going problem in PA stems from projects that were approved and built more than a couple of years ago.  Those are the properties that need to step up now and pay for their share of the public infrastructure, along with all properties that rely on public infrastructure to manage runoff in excess of 2-year storms.

I know there will be some people griping that this legislation somehow amounts to a new tax – a stormwater tax.  Hogwash.  One of the first things that any student of economics learns is TANSTAFL – the acronym standing for, “There Are No Such Things As Free Lunches.”  Whether we’re talking lunch or stormwater discharge, if you are not paying for it yourself, someone else is paying for it.  In the case of a shopping center discharging huge volumes of stormwater runoff from their expansive parking lots during and following intense rain events, that property is sending way more stormwater runoff to the nearest body of surface water than the undeveloped land would have discharged.  Therefore, that shopping center should improve their capacity to retain and infiltrate stormwater on their own property.  If they chose to ignore that responsibility, the local taxpayers should not pay for infrastructure to mitigate that runoff, and they should not be inconvenienced by flash flooding from inadequate, private stormwater management facilities.  Thus, a usage fee assessed by an MSA is exactly that – a fee for services rendered.  Cutting off a property owner from a free lunch – in this case taxpayer subsidized stormwater management – is clearly NOT a tax.

To be fair in this post, I have to direct some blame to municipalities themselves for, in most cases, having archaic and counter-productive zoning and land development ordinances that require far more parking capacity (and thus more impervious surfaces) than is really necessary at big box developments.  More realistic parking space requirements and provisions to allow rain gardens and some of the newer types of permeable pavement (ie. pervious surfaces) would go a long way to ease the stormwater impact of new commercial projects and to retrofit existing commercial developments.       

This new legislation simply makes MSAs legally legitimate entities.  It does not mandate any municipality to create an MSA.  Municipal leaders, both elected and volunteers, need to take the next step and form exploratory committees to thoroughly evaluate the pros and cons of creating an MSA for their municipalities.  Once municipalities look past the red herring of the "new tax" claim, I think it will be clear for most local governments that an MSA would greatly benefit their residents by relieving part of the current stormwater burden on their Public Works budgets.

(all photos copyrighted by author)

7/26/13 - Additional Info on SB 351
Last week when I first learned about SB 351, I wrote to my State Senator, Pat Browne, a co-sponsor of this legislation, to find out whether this legislation would apply to the case of multiple municipalities that wanted to create a joint MSA.  This would be significant, because stormwater and floodwater management must really be addressed in terms of an entire watershed.  And I've never seen a watershed whose boundaries followed the convoluted boundaries of any one particular municipality.  Good news.  I just received the following response from the Legislative Counsel in Sen. Browne's office, Vicki Wilken.  She said:
"It is my understanding from speaking with the prime sponsor of the legislation, Senator Erickson, that the intent of the legislation was to allow municipal authorities to do just as you mention in your email, allow those municipalities in the same watershed basin to work together on storm water management planning and projects.

 "SB 351 amends the Municipality Authorities Act (Chapter 56 of Title 53) by adding storm water management planning and projects to the purposes and powers of municipal authorities.   In addition, the act provides municipal authorities with the ability to engage in water management planning and projects, but they are not required to do so.  Further, those existing authorities may include these in their operation of existing projects."

Why Natural Gas Companies Love Pennsylvania

I've mentioned in a previous post (PA Is All Fracked Up - Feb. 2, 2013) and in tons of social media comments my disdain for Pennsylvania's lack of a severance tax for natural gas companies based on the volume of gas that they extract and ship to market in PA.  PA's convoluted surrogate for a severance tax is nothing more than corporate welfare to gas companies doing business in PA.

Well extracting natural gas near residences in Washington County, PA.
 (photo credit: State Rep. Jesse White - supportjesse.com)

PA and Alaska are the only two (out of 32) gas-producing states in the country that do not charge gas companies a severance tax based directly on the value of the gas they produce (although Alaska does have a very unique and effective tax system for oil and gas produced in their state).  Instead, we in PA have what Gov. Corbett has decided to call an "impact fee" charged to gas drillers per well rather than based on the volume and market value of the gas produced.  It's a deliberately complicated program that was designed by the governor and his cronies to NOT look or sound like a severance tax in any way, because Corbett took Grover Norquist's Anti-Tax pledge when he ran for office in 2010.  So because of our governor's pledge to a Washington lobbyist, as PA's natural gas production increases, the impact fees paid by the gas companies effectively remain relatively flat.  The Pennsylvania Budget and Policy Center has put out one of the better analyses that I have seen on PA's impact fee.  The PA Budget and Policy Center is a project of the non-profit Keystone Research Center.

If gas companies operating in PA are getting what amounts to a tax break by having avoided a severance tax, you might think that their lower costs of doing business in PA would mean that PA's landowners who have leased their land to drill natural gas wells would be seeing handsome royalty checks. Unfortunately, that is not the case.  A news story I read yesterday from Pittsburgh's Tribune-Review described marketing and transportation fees that gas companies are deducting from the royalty checks sent to landowners.  While these deductions can only be evaluated on a case by case basis to determine whether they are contractually legitimate, the larger question is whether it is legal for these deductions to take the net royalty payments below the state-minimum 12.5%.  These deductions seem like a duplicitous means of paying less than the legal minimum percentage of royalties to landowners who lease their land to gas companies.  If so, it would mean that the gas companies are getting both a break on the severance tax from the state and a break in royalty payments by passing on some of their costs of doing business to landowners.  What Gov. Corbett has created in PA is not a business-friendly climate but rather a climate in which the deck is stacked in favor of businesses with PA residents getting fleeced.

Before I finish, I want to make one more point about the counter-effectiveness of PA's current impact fee system.  By keeping impact fees much cheaper than severance taxes in other states, the price of PA's natural gas is made artificially low.  This artificially cheap natural gas becomes an attractive commodity to export overseas.  That's great news for the U.S. trade deficit, but the net effect is that every cubic foot of PA's natural gas that is shipped overseas is one less cubic foot of gas available domestically to bring us closer to energy independence as a nation. And even though I enjoy paying less for my natural gas right now, we need to critically evaluate claims by Gov. Corbett and the natural gas industry that development of PA's Marcellus Shale gas fields will bring the U.S. closer to energy independence as they have promised.

Opening up the overseas market significantly will increase demand significantly and will drive up the cost of natural gas for U.S. consumers, according to a recent article in Bloomberg Businessweek.  Gas producers are seeking to market U.S. natural gas to overseas markets, because natural gas prices in some countries are three times what U.S. consumers are currently paying.  If the domestic supply of natural gas has to equilibrate with global demand and global prices, the U.S. will remain dependent on our current mix of domestic and foreign oil.  The U.S. crossover to natural gas for vehicles and industry that is currently touted by many will lose it's economic incentive to materialize. We all need to let our state representatives know that PA's current natural gas impact fee system is a sham that needs to be overhauled.

Open Space Preservation: An Ounce of Prevention is Worth a More Than a Pound of Strip Malls

The Back Story
As I've mentioned in other posts, I chair my township's Environmental Advisory Council (EAC).   The seven EAC volunteers are appointed by our township's Board of Commissioners to advise that board on environmental matters affecting the township. The Commissioners usually reject our recommendations for a variety of reasons.  Conventional wisdom would say that our EAC's recommendations are typically at odds with the pro-development sentiments of most of this Board of Commissioners.  I've pointed out in a couple previous posts that, on our board of five commissioners, two are Realtors and a third is CEO of the local Association of Realtors.  And this Board of Commissioners presides over what has been the fastest growing municipality in Pennsylvania for the past 10-15 years.

With the excessive growth in population and associated loss of farmland over the past 20+ years, lots of residents are up in arms about any new developments that are approved in our township.  The two biggest concerns are increased traffic and loss of open space.  This open space provided a semi-rural feel to our 22 square-mile township that was present when many of the 31,000 current residents either moved here or grew up here.  But there is noticeably less undeveloped open space remaining.

The Status Quo

Allen Distribution warehouse (photo credit: allendistribution.com)

Many of the residential, warehouse, and commercial strip mall developments that we now have or have been approved and are waiting to be built were once some of the most fertile farmland in Pennsylvania.  As owners of family farms neared retirement age, with no children interested in continuing in the family business, farmers understandably sold their land to developers eager to build bedroom communities in close proximity to I-78 and less than half an hour from the New Jersey border.  So should we try to gerrymander the current zoning map to stop the remaining farmers, who are our neighbors, from cashing in on their nest egg?  That would be pretty un-neighborly, probably illegal, and not likely to happen under the current Board of Commissioners.

Part of a contentious, 700-acre project that recently saw over 600 acres rezoned from Agricultural Preservation to combinations of Light Industrial, Commercial, and Residential. This owner was not a mom & pop farmer; he is a corporate farmer with a long history of paving fertile farm fields to build warehouses. photo credit:  Morning Call (mcall.com).

How to Be Proactive
Rather than risking an adversarial relationship with our remaining farmers, whether they are mom & pop farmers or industrial operations, it seems like a more reasonable option might be for the township to purchase key tracts of remaining farmland and other open space, at market value, to prevent additional traffic from gridlocking us and prevent paving over our remaining green fields with more asphalt.  Sounds great, but it also sounds costly.

Our township currently has no property tax.  Until sometime in the 1980s, we had a property tax.  But it was eliminated, because the township was receiving so much fee revenue from developers building new housing developments.  In addition to development fee revenue, the township assesses residents a 1% earned income tax.  With an earned income tax, retirees and others on limited incomes aren’t saddled with paying a tax on what might be their only significant asset. And although the township has a reserve fund of several million dollars, that fund would not last long if we use it to buy up open space properties.

Therefore, our EAC has proposed that the township hold a referendum for residents to decide whether to institute an Open Space Tax to raise funds for the township to purchase some of the remaining open space in the township.  Voters in forward-thinking municipalities in Pennsylvania have been authorizing this sort of thing for the past two decades to preserve open space.  Some municipalities have done it by borrowing paid for by bonds, and others have done it by taxing.  Most Open Space Taxes are an earned income tax (0.25% is the most common rate).  And many Open Space Earned Income Taxes are capped at five-years, after which they would have to be re-authorized by voters.  Our Board of Commissioners’ Budget & Finance Committee has not rejected our proposal yet.  Instead, they requested us to provide a report on all available financing options so that they can make a more informed recommendation to the full Board of Commissioners.

This should not be a difficult decision for our commissioners.  We are asking them to authorize a referendum to let the voters decide.  That way, no politician has to be worried about publicly voting for a new tax.  If our commissioners authorize the referendum, our residents can decide if open space is important enough to pay an additional modest tax for a limited time to fund buying land for preservation before developers buy it. Preserving our open space will preserve our property values (assuming that excessive traffic and suburban sprawl have negative impacts on real estate values).  And our remaining farmers can still cash in on their farmland nest egg to fund their retirements.  Sounds logical, like a win-win.  Stay tuned.

Home. (photo credit: GoogleEarth)