Sunday, November 22, 2015

If NY permits fracking, have clear rules and taxes ready

When mulling the controversial topic of fracking, the outlook of an elected commissioner in Susquehanna County, Pa. well-represents the “on the one hand/on the other hand” debate.

Commissioner MaryAnn Warren says the benefits are obvious in permitting wells and natural gas extraction under the open land of her county. More business, more jobs and more capital projects are the yield, she told reporter Tom Wilber for his three-part series on The Promise of Fracking, which will start this weekend.

Yet, on the other hand, Warren notes: “They (energy companies) came in like cowboys. ... Things were unruly and unregulated, and they (the Pennsylvania Department of Environmental Protection) didn’t know what they were doing.”

As much as we like to be opinionated on the topics of the day, we cannot come down in favor or against fracking. We also find ourselves falling into the “one hand/other hand” dilemma.

Economic rewards of pulling natural gas from the ground are clear. The group with the most to gain – New York’s farmers and landowners – could cash in on leases and royalties from the drilling companies (of course the debate continues on how much of that money is plowed back into the local economy). But everyone also would enjoy the benefits of lower energy prices.

Environmental risks also make us worry. The immediate environmental impact is presented by Wilber in his series. Some land is rendered uninhabitable because of the drilling’s reported effect on drinking water. But, are these anomalies or are they symptomatic of long-term harm to our environment?

The Promise of Fracking series, which stands back and makes an assessment of how it’s going in Pennsylvania, offers valuable insight for New Yorkers should the state decide to allow fracking.

Gov. Andrew Cuomo gave drilling a thumbs-down a year ago. But what of the next governor or the one after?

Pennsylvania’s hard-learned lessons need to be remembered if New York ventures into this area:

  • Educate landowners in leasing and royalties and how to read contracts with energy companies. If possible, the state also might want to regulate the feeding frenzy of buying mineral rights on New York land.
  • Before the first well is drilled, have a solid and clear set of Department of Environmental Conservation rules covering how drilling companies use our environment – yes, it is our environment. Unlike Pennsylvania, add enough DEC inspectors to provide accountability over the drilling activities.
  • Extract as much public money out of the energy companies as possible. Squeeze hard with a tax like Texas or other drilling states as opposed to a weaker and potentially less lucrative impact fee.
Any good business, including the natural gas energy companies, seeks to minimize expenses, maximize revenues and push profits to the highest level possible.

If New York state one day gives its permission to frack, the state should approach natural gas extraction as a business would.

Build a system to allow landowners to extract the maximum return on leases and royalties.

Invent a tax that doesn’t scare away the energy companies, but also realizes every potential dollar from this highly profitable industry for the public's benefit.

Consider a system of the drilling industry paying the state DEC directly for the cost of regulation so the inspectors and regulators aren’t subject to annual state budget cuts.

For the promise of fracking to come true in New York, the state should have a solid, thoughtful system of regulation and taxation – unlike Pennsylvania.

By the Editorial Board
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