EDITORIAL: No, Drillers Already Paying Their Way

- EDITORIAL: No, Drillers Already Paying Their Way

Tuesday, August 02, 2011
The Philadelphia Inquirer
by Matthew J. Brouillette

Despite a deep recession, Marcellus Shale gas drilling in Pennsylvania has created tens of thousands of jobs, rescued many landowners from foreclosure and bankruptcy, and generated fortunes for farmers, laborers, and businesses. Nevertheless, some have stoked fears of environmental disaster and spread the myth that drillers aren't paying their share of taxes. Such attacks have led many to the mistaken conclusion that the industry should pay a special tax or what's euphemistically called an "impact fee."

While a tax on natural gas would not drive the industry out of the state, it would be passed on to residents -- folks like Jim VanBlarcom, a Bradford County dairy farmer who testified that leasing a small portion of his land for drilling enabled him to double his herd. He's not alone: Pennsylvania's gas industry is estimated to have produced more than $7 billion in lease and royalty payments since 2006. Moreover, it's given rural areas thousands of new jobs paying an average annual salary of nearly $70,000.

The influx of new employees means local governments have seen more revenue from the emergency and municipal services tax, which is withheld from workers' paychecks. Other revenue streams have grown, too. Bradford County has received about $1 million from the drilling industry in recording and copying fees alone. And drillers have paid $1.1 billion in state taxes since 2006, according to the Department of Revenue.

But even if local residents and governments are benefiting, some feel the industry should pay more to do business in the Keystone State. This notion is bolstered by a misperception, often promoted by environmental interests, that gas companies avoid taxes through some loophole.

But drillers pay the same taxes as every other business in the state, and those taxes rank among the highest of their kind. Pennsylvania has the 10th-highest state and local tax burden in the nation, and the second-highest corporate income-tax rate in the world.

That drillers pay the same taxes as other businesses isn't good enough for some, though. They argue that gas extraction imposes environmental and other costs that justify an extraordinary tax. Most of us care about the environment and believe businesses should pay for the government they use, but those calling for an additional tax or fee on drillers fail to understand the industry's true impacts or contributions.

In recommending an impact fee, Gov. Corbett's Marcellus Shale Advisory Commission provided anecdotal examples of potential drilling impacts. But these must be compared with what gas companies contribute.

In addition to state and local taxes, gas drillers voluntarily spent more than $200 million on road repairs and improvements in 2010 alone. Ultimately, Pennsylvania law ensures that drilling companies, not taxpayers, are responsible for whatever environmental and infrastructure damage they cause. And the fees drillers pay to the state Department of Environmental Protection cover the cost of inspections.

Some of the pro-tax pressure is coming from special interests that want more funding for pet programs such as "Growing Greener." Set to lose its funding this year, the program subsidizes a wide range of projects, from alternative energy to downtown redevelopment. In fact, some of the groups pushing for the tax have received such subsidies. No matter how lawmakers or lobbyists sell it, though, Growing Greener has nothing to do with drilling impacts.

Despite the manufactured fears of disaster and cheers for a unique tax on drilling, Pennsylvania can balance economic growth with environmental protection without imposing a new tax. The true impacts of drilling can be addressed by charging drillers fees for services provided, requiring them to be insured for environmental costs, and other measures.

Any impact fee must identify specific costs tied to drilling and demonstrate that they are not already being covered. Otherwise, another tax or fee on the industry is really just a punitive tax on Pennsylvania's people and prosperity. Matthew J. Brouillette is president and CEO of the Commonwealth Foundation.

Copyright (c) 2011, The Philadelphia Inquirer

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Shell and HP advance seismic sensing capabilities

Shell and HP advance seismic sensing capabilities

March 23, 2011

Shell and HP have announced a breakthrough in the capability of their jointly developed inertial sensing technology to shoot and record seismic data at much higher sensitivity and at ultra-low frequencies.

The new onshore wireless seismic acquisition system is designed to provide a clearer understanding of the earth's subsurface, thus increasing prospects for discovering greater quantities of oil and gas to meet the world's increasing energy needs.

The sensing technology has now been demonstrated to have a noise floor - a measure of the smallest detectable acceleration over a range of frequencies - of 10 nano-g per square root Hertz (ng/rtHz), which is equal to the noise created by the earth's ocean waves at the quietest locations on earth as defined by the Peterson Low Noise Model. The tests were conducted in the seismic testing vault at the U.S. Geological Survey's (USGS) Albuquerque Seismological Laboratory facility in New Mexico.

"Responding to the energy challenge, the oil and gas industry is tackling ever deeper and more complex reservoirs, as well as reservoirs in very tight rock systems," said Dirk Smit, chief scientist for Geophysics and vice president of Exploration Technology, Shell.

"In particular, for onshore settings, this requires enhanced quality seismic data as well as the cost-efficient, flexible deployment of seismic sensor networks. The collaboration with HP demonstrates Shell's strategic approach to driving innovative technology solutions through active partnering."

"This new sensing milestone is the latest step in the collaboration between HP and Shell, which is on track to produce a leap forward in onshore seismic data quality to improve the exploration risk evaluation and decisions, illustrating the industry-wide benefits that can be achieved through cross-company innovation," said Rich Duncombe, senior strategist, Technology Development Organization, Imaging and Printing Group, HP.

At the test facility, HP was able to compare the seismic response of the new sensor side by side with a USGS reference sensor when an earthquake occurred in the Gulf of California during the testing period. The signal from the reference sensor was matched by the new sensor down to 25 mHz, verifying the sensor's response at low frequencies.

The seismic system uses the breadth of HP's technology development capabilities as well as Shell's advanced geophysical expertise in seismic data acquisition systems and operations. As such, this collaboration builds on the core strengths of each company to advance technology in this field.

The system will be delivered by HP Enterprise Services and the company's Imaging and Printing Group (IPG). It is based in part on the high-performance sensing technology originally co-developed by HP Labs - the company's central research arm - along with IPG and Shell research in seismic network design.

HP and Shell's collaboration is a cornerstone for an information ecosystem that empowers people to make better, faster decisions to improve safety, security and environmental sustainability while transforming business economics. Sensing solutions are positioned to provide a new level of awareness through a network of sensors, data storage and analysis tools that monitor the environment, assets, and health and safety.

Additional information on HP's integrated sensing solutions, and the collaboration between HP and Shell, is available at www.hp.com/go/sensingsolutions.

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