Pennsylvania’s Oil and Gas Lease Fund Still Not Reserved for Conservation

Posted on 08-07-2017

By Nick McClure

 

Pennsylvania policy makers have debated at length a potential severance tax on natural gas, but a more immediate gas-related question faces them: how to manage the revenue from leasing out state lands for natural gas development. In June, the state’s Supreme Court issued a landmark ruling on the state’s role in managing its natural resources. Despite appearances, the ruling did not settle how policy makers must manage the Oil and Gas Lease Fund. 

 

Established in 1955, the Oil and Gas Lease Fund is the repository for revenue from oil and gas development on state lands. Revenue is received through three streams: rents paid per acre, royalties based on the value of oil and gas extracted, and initial bonus payments paid per lease. Intended to “be used exclusively for conservation, recreation, dams, or flood control,” the fund was managed by the Department of Conservation and Natural Resources until 2009.

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Whither Nuclear Power?

Posted on 07-13-2017

By Nick McClure

On May 30th, Exelon, the largest nuclear power plant operator in the U.S., announced it will close its Three Mile Island Generating Station by fall 2019, 15 years before the plant’s current federal operating license is set to expire. After generating a $300 million loss over the past eight years, Three Mile Island joins 14 other U.S. nuclear power plants slated for retirement, since 2013, due to unprofitability. With one quarter of all nuclear plants announcing retirement within a four-year period, the U.S. nuclear power industry is undergoing a seismic shift. 

Nuclear energy, a source of stable, carbon-free baseload power, currently accounts for 20 percent of U.S. electricity generation, but a recent study by MIT’s Center for Energy and Environmental Policy Research estimated that approximately two-thirds of all U.S. nuclear power plants will be unprofitable for the years 2017-2019. This is a troubling sign for an industry in which half of the existing plants operate in deregulated electricity markets. Adding to concerns is the fact that only one new plant has joined the fleet in the past two decades. Beyond the local economic impacts of lost jobs and tax revenue, the decline of nuclear power generation has implications ranging from the volatility of electricity prices to greenhouse gas emissions. 

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Is Lake Erie Poised to Become a Hotspot for Wind Power Generation?

Posted on 07-03-2017

By Nancy Jones

Offshore wind turbines may not come to mind when considering electricity generation in the Midwest, but Ohio alone boasts over 300 miles of shoreline along Lake Erie. Innovative developers in the state look to the Great Lakes shoreline to take advantage of the lake’s wind resources. According to a 2014 report by Bloomberg news, this region has the potential to generate 1,000 megawatts of wind energy by 2020, enough to power approximately over 160,000 homes. However, certain barriers exist that may hinder the adoption and scaling of this model in the state’s coastline.  First, state lawmakers are keen to support conventional forms of energy as well as scale back existing renewable energy portfolio standards that support the development of wind energy. Next, the current price for offshore wind energy is not cost competitive with conventional forms of energy, or even other renewables. Lastly, renewable energy standards in the region that in theory should bolster development like this are, in fact, designed to favor cheaper renewables (i.e. solar) over offshore wind and, in some cases, discriminate against renewable electricity produced in other states. 

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Abandoned Unconventional Natural Gas Wells: A Looming Problem for Pennsylvania?

Posted on 06-13-2017

By Associate Professor Jeremy Weber and Andrew Earle

Pennsylvania has a long legacy of natural gas drilling. One unfortunate aspect of the legacy is a host of abandoned shallow gas wells throughout the state, some of which likely leak gases or liquids harmful to animals, plants, or people. This raises the question of the fate of the more than 10,000 unconventional natural gas wells that have been drilled in the state over the last decade, with more drilled each day.  

Pennsylvania, like many other states, uses a bonding system to motivate companies to properly reclaim wells. Before the state grants a permit for a well, it requires that the company operating the well commits funds that, if the well is eventually abandoned, would be forfeited and used by the state for reclamation. Bond amounts vary in a tiered structure based on the quantity of wells operated by a company (see table). As an example, a company with 55 wells must pay a flat fee of $290,000 to cover the first 50 wells and an additional $10,000 for each of the last 5 wells, leading to a total of $340,000 in bonds.  Companies operating many wells benefit from caps on total bond amounts: a company operating up to 150 wells would never pay any more than $430,000; a company operating more than 150 wells would never pay more than $600,000.

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Does the U.S. already have a carbon tax?

Posted on 02-09-2017

By Assistant Professor Jeremy Weber

The National Oceanic and Atmospheric Administration recently announced that 2016 was the hottest year in recorded temperature history, which dates back to 1880. Decades of rising greenhouse gas concentrations and temperatures have led many to call for policies to reduce carbon emissions, including a tax on carbon. A recent proposal for a carbon-related tax came from former President Obama who, in February of 2016, proposed a $10 per barrel tax on oil.

Does the U.S. already have a tax of this sort? Yes, in a crude way. Most U.S. state governments tax oil and gas production occurring within their boundaries, which is in addition to general state taxes such as corporate income taxes or sales taxes. Over the years 2004-2013, state governments taxed the typical dollar of oil and gas drawn from the ground at a rate of 4.2 percent. The rate translates into $2.6 per barrel or about $5.5 per ton of carbon. To put the last number in perspective, the price of carbon in the European Union’s Emissions Trading System has ranged from $4 to $6 per ton over most of 2016 and January of 2017.

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About the Blog

The GSPIA Energy and Environment blog provides commentary and analysis that furthers understanding of E&E issues of public interest. Its primary contributors are GSPIA faculty and students.

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Editors

Nick McClure, Managing Editor
Nick is a Master of Public Administration student at GSPIA. His research and professional interests center on state and local public finance issues related to energy, infrastructure, and the environment. 
Questions about the blog should be directed to Nick at ngmcclure@pitt.edu

Max Harleman, Co-Managing Editor
Max is a PhD student at GSPIA. His research focuses on the governance of energy projects and their associated economic and environmental impacts on communities near development.

Jeremy Weber, Faculty Editor
Jeremy is an associate professor at GSPIA. His research cuts across energy, agriculture, the environment, and well-being. He teaches classes in quantitative methods and energy and environmental policy.

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