September 13, 2012

PA Governor says yes to shale but no to solar

This December, the Corbett Administration will start handing out up to $20 million of taxpayer dollars over the next three years to businesses, local governments, non-profits and schools to buy natural gas powered trucks up to $25,000 per vehicle. At the same time the Governor has refused to support a proposed law to extend financial incentives for state’s solar industry.

The Governor is on record as declaring state incentives which aid shale gas development are positive and cost effective while incentives for solar energy are expensive and a drain on taxpayers.

Ironically, the Governor stated one of the purposes of State’s new natural gas incentives is to bring about higher natural gas prices which could result in higher fuel operating costs for the very buyers of those trucks the state is providing incentives for.

The details of the Corbett Administration’s incentive for buying natural gas trucks is found in the recently passed State Act 13. The maximum incentive is 50% of the price of the truck or $25,000.00 whichever is less. National gas powered cars already receive a one-time $1,000.00 incentive.

Governor Corbett stated “The more we create demand for the natural gas; hopefully we’ll see that cost of dry natural gas go up some, so that [energy companies] continue to drill,” referring to the recent and dramatic downturn in the Pennsylvania Marcellus less than 2 and half years after the state saw a shale gas drilling boom led locally Chesapeake Energy and Range Resources among others.

Drillers have recently decreased operations in Pennsylvania in favor of wet oil infused shale gas in Ohio. When shale gas industry came into the state, Pennsylvania landowners and governments had virtually no forewarnings such a dramatic shift by the drillers could happen so quickly.

As natural gas truck incentives were being passed, Pennsylvania House Bill 1580, to extend the financial credits for businesses and homeowners for installed solar systems is now considered dead. The bill was created to extend the renewable energy credits which can be sold in the open market thus allowing the State to meet its mandated Renewable Portfolio Standard. The solar incentives in HB1580 are not new but rather an extension of previously created incentives to meet prior legislation law passed by the state. The law known as the Pennsylvania Renewable Portfolio Standard mandates Pennsylvania must have 18% of its energy production from renewable sources by 2021 with minimal amounts required from solar.

Earlier this year State Republican Senator Mike Turzai quickly rallied support from the Pennsylvania Chamber of Commerce to oppose the bill according to solar lobbyist Maureen Mulligan. The Chamber stated the solar incentives would add more than $1 billion to Pennsylvania’s electricity cost but then never provided details of this calculation.

Some feared that more solar in Pennsylvania will decrease the demand for natural gas used to make electricity and thus somehow harm the State’s shale gas industry.

Senator Turzai has made national headlines recently with his staunch and aggressive support of several high profile bills which many believe unfairly targets women and minorities. He is on record as saying, “…. First pro-life legislation – abortion facility regulations — in 22 years, done. Voter ID, which is gonna allow Governor Romney to win the state of Pennsylvania, done.”

Governor Corbett was asked recently about his position on the solar incentives in HB1580 replied, “When it comes to wind and solar, I believe we haven’t renewed exactly what there was before, but that was all subsidized,” “Taxpayers paid for that.” “Is it nice to be able to do that, would it be nice to give some tax credits? Yes,” “right now we don’t have the luxury of having money to subsidize an industry when we have other forms of energy that are more than overly abundant”

Starting this October, PECO Electric has announced an effective 21.5% price increase on its base line electricity generation rates going from roughly eight and half cents a kilowatt hour to ten and half cents a kilowatt hour at a time of some of the lowest prices for natural gas seen in the last 10 years despite the addition of solar and shale gas development within the state.

The Governor is rolling out his natural gas truck incentives at the same time he is pushing hard for a $1.7 billion tax relief package for Shell’s proposed fossil-fuel based cracker plant in western Pennsylvania.

Recently it’s been reported that the Texas Barnett and Louisiana Haynesville shale gas formations now appear to have begun peaking in shale gas production based on several years of per well field data. This despite new shale gas wells coming on line. These shale plays were developed a few years prior to the Pennsylvania Marcellus leading some to question if the same will not happen at some point in the Marcellus based on now well documented historical shale gas depletion curves.

If the amount of shale gas as promised by the industry is not technically recoverable or if the price to extract the shale gas must be significantly higher than today’s price for the industry to continue drilling, some would argue it’s then a gamble to only develop just a shale gas resource. The low natural gas price per gallon of today for buyers of natural gas powered trucks under the state program could become much higher in the near future.
Throughout Europe and Asia, balanced energy portfolios of fossil fuels and renewables including significant amounts of solar and wind are now becoming the norm with little fear renewables will displace oil, coal, natural gas or coal use anytime soon.

However here in the U.S., the “One energy source winner takes all” mentality appears to continue to hold sway along with the failure to recognized that Pennsylvania taxpayers as do the rest of U.S. taxpayers already pay for massive tax credits and financial incentives to Big Oil and Gas and have done so for decades.

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