Vol. 11, No. 19 - September 17, 2009
Snake oil sales reps

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Snake oil
A product that has been proven to not live up to the vendor's marketing hype. The term comes from the 1800s in which elixirs and potions of all kinds, even ones that supposedly included the oils from snakes, were sold as a cure for everything that ailed a person.
The Free Dictionary

The natural gas lobbyists - who have spent more than $1 million lobbying the Pennsylvania legislature so far this year to avoid a severance tax on Marcellus Shale gas drilling - have a lot in common with the snake oil sales reps of old. They are making spectacular claims about the benefits of gas drilling even as they poor-mouth about economic fragility of their industry. A look at the facts makes it clear that virtually none of the lobbyists' claims are true. Our message to state legislators - Buyer beware.

The big claim is that the industry is in its infancy, and we will kill it off with a severance tax. This doesn't even pass the straight-face test. As Carla Castillo recently said in the letter published in the Philadelphia Inquirer, "If the natural gas industry is an infant, it was born with a silver spoon in its mouth."

The drillers flocking to Pennsylvania are, by and large, huge multi-national corporations who are already bragging to their shareholders about how much money they will make by draining Pennsylvania's natural gas. And their CEOs would give the AIG execs a run for their bonus money. Chesapeake Energy's CEO Aubrey K. McClendon's compensation package last year was $112.5 million; Range Resources' CEO, John H. Pinkerton, took home over $5 million; Richard Weber made nearly $2.5 million for running Atlas America's Pennsylvania subsidiary.

The other claim is that Pennsylvania consumers will be hit with higher costs for natural gas. Hogwash for this claim, too. The Pennsylvania market conditions are significantly better than anywhere else in the country, and most of the rest of the states with gas deposits charge a severance tax. Pennsylvania's natural gas deposits have a huge competitive advantage, with higher Btu ratings than supplies elsewhere, and significantly reduced delivery costs, since the gas is close to lucrative northeast markets. A severance tax in Pennsylvania won't change either of those advantages.

We already pay too much in taxes is another bogus argument of the industry. This one doesn't hold up in the light of day, either, and it is remarkable that our elected officials won't call them on this fabrication. Most of these large corporations are incorporated in a way to diminish their tax liability - at most, they pay the same personal income tax rate that average Pennsylvania citizens pay. But unlike our citizens, the gas industry clearly doesn't feel the need to pay its fair share.

Then there's the cry, but we're bringing jobs here. Most of the drillers have brought their own workers into the state for most of the jobs, from places like Texas and Louisiana. Each well requires a large crew of workers, but the work at each well is temporary. Workforce development experts note that once drilling is complete 83 percent of the jobs disappear. The gas industry relies primarily on an itinerant workforce rather than developing permanent, local jobs.

The facts are clear, but our elected officials are about to buy cases of gas industry snake oil. As part of the proposed budget agreement, not only will the drillers avoid paying the severance tax they pay elsewhere, our state is about to make sweetheart deals with the drilling industry to sell off leases in our state forests and parks when gas prices are at seven year lows. Our natural areas will be changed forever, and we'll have no way to fix the damage.

While our elected officials may be ready to swallow gas industry snake oil, the people of Pennsylvania are not such easy marks. We weren't born yesterday. All of us should let the legislature and the governor know that this is very bad deal all around.