First in an ongoing series examining all aspects of developing the Marcellus Shale.
Stories keep rolling in about the booming economy in a faraway land. Tales of jobs, new construction on every corner, more jobs, hotels booked for a year, office space — long vacant — now renting for the highest prices ever fetched, and even more jobs. Yet despite years of growth, the influx of foreign capital hasn’t subsided, but in fact, continues to exponentially increase. Combined, all these things have created a climate so healthy that taxes haven’t risen in eight years.
As with Doubting Thomas, something this good must be seen to be believed.
So as my trip was being arranged, I was asked the duration of my flight to China, and how long I’d be away. As to the second question, the same day. I can’t answer the first, because it’s based on a false assumption. I was, most definitely, not going to China.
Although solid growth and low taxes are now virtually nonexistent in this country, I had a mere three hour drive to behold the only thing that can bring Pennsylvania — and maybe the nation — back from the edge of the abyss.
Time to get up front and personal. Time to meet Marcellus Shale.
Which of the following is true:
A) Bon jour, monsieur. I present to you Marcellus Shale, ze best French wine this side of ze Seine River;
B) Meet Marcellus Shale, the new Philadelphia 76er who might help the NBA team win more than 10 games;
C) Welcome to the Marcellus Shale, one of the largest natural gas fields in the world, and centered in Pennsylvania, where 60 percent of the state sits atop the reserves, whose liquid gold is conservatively valued in the hundreds of billions.
Unfortunately for vinophiles and the impotent Sixers, the answer is C.
But unbelievably, there was almost an asterisk. If lame duck Pennsylvania Governor Ed Rendell and his protégé, failed gubernatorial candidate Dan Onorato, had their way, the Marcellus Shale industry would have died before ever getting off the ground. Those politicians wanted to impose a severance (extraction) tax on natural gas, as high as ten percent. Rendell’s rationale?
Oil companies needed to pay their fair share.
Thankfully, Governor-elect Tom Corbett, with a No-New-Tax promise being the cornerstone of his campaign, trounced Onorato. In doing so, he slammed the door shut on the catastrophic failure that will forever be known as the Rendell Legacy, and opened a portal to opportunity not seen in Pennsylvania for generations.
Corbett and Onorato were like night and day on a number of issues, but none more important than how to proceed with the Marcellus Shale. A severance tax, especially the one proposed by Rendell/Onorato, would have undeniably been the death knell of what is a mobile industry.
While Pennsylvania is blessed with a sizable portion of the highly-profitable Shale, our competitors are not far behind: West Virginia, Maryland, Ohio, New York and up into Maine and Canada. And Michigan, with the second highest unemployment rate in the nation, is making lucrative offers to the industry to extract Shale gas from beneath the Great Lakes.
In his attempt to make Pennsylvania competitive again — dare we say viable —, Corbett innately understood two things that were lost on Rendell. First, if you want less of something, tax it. Second, you can’t tax your way out of a recession and into prosperity.
But what about the “fair share” that the industry allegedly doesn’t pay? Pure election year theatre, orchestrated in a shameless attempt to close the $5 billion budget deficit created by the reckless former Governor.
The real story?
The natural gas companies in Pennsylvania, just like all other corporations, are saddled with the second highest corporate net income tax (CNI) in the nation (10 percent), along with an onerous capital stock and franchise tax and the country’s most hostile legal system. And this horrid picture doesn’t even include the world’s second-highest national corporate income tax rate (40 percent).
Put another way, the proposed severance tax…
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Chris Freind is an independent columnist, television commentator, and investigative reporter who operates his own news bureau, www.FreindlyFireZone.com
Readers of his column, “Freindly Fire,” hail from six continents, thirty countries and all fifty states. His work has been referenced in numerous publications including The Wall Street Journal, National Review Online, foreign newspapers, and in Dick Morris’ recent bestseller “Catastrophe.”
Freind, whose column appears nationally in Newsmax, also serves as a guest commentator on Philadelphia-area talk radio shows, and makes numerous other television and radio appearances, most notably on FOX. He can be reached at CF@FreindlyFireZone.com
December 2, 2010 at 2:29 pm Comments (0)