Governor Sununu Vetoes Net Metering Bill in New Hampshire

Earlier this week, Governor Chris Sununu vetoed two energy bills, one of which would have expanded electric net metering practices in New Hampshire. Renewable energy advocates hope legislators will override his veto and push the bill into law. S.B. 446 would increase limits on net metering by towns and businesses, allowing bigger solar, wind, hydro and biomass projects to receive larger subsidies for the energy they generate. In a letter released Tuesday, Governor Sununu detailed his concerns, principally the massive economic costs the increased net metering caps would have on ratepayers across the state.

“These bills send our state in the exactly wrong direction. We need to be taking steps to lower electric rates, not passing legislation that would cause massive increases,” Governor Sununu stated in his missive following the vote. The Governor went on to point out that S.B. 446 would cost ratepayers at between $5 to 10 million annually and was a ultimately a handout to large solar energy developers.

Net metering is a bad deal for small businesses across New Hampshire. If signed into law, S.B. 446 would have quadrupled the state’s net metering caps, allowing residents who use solar panels to sell more of the excess energy they produce back to the power companies at inflated prices. This practice shifts the cost of grid upkeep back to non-solar users. Many small businesses who fit into this category ultimately pay higher rates and see no tangible benefit. Family Businesses for Affordable Energy believes that energy incentive projects should be able to compete on their own merits, and not place additional financial burdens on businesses and working families. Family Businesses for Affordable Energy applauds Governor Sununu on his decision and encourages leaders in other states to follow his example.

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Tax Reform Continues to Lower Energy Bills for Small Businesses

In April, Family Businesses for Affordable Energy highlighted a long and growing list of utility companies that are passing the savings from tax reform on to their customers in the form of lower electricity rates. The Tax Cuts and Jobs Act slashed the corporate rate from 35% to 21%, and those reductions have provided tangible benefits for electricity users in the private and commercial sectors. Cost-conscious family businesses across the country continue to benefit from the renewed, enterprise-friendly tax and energy policies that Congress and the administration have enacted over the past year and a half. Since April, the list of utilities cutting rates on energy consumers has grown exponentially, reaching 101 as of June 6. One such example is Otter Tail Power Company. This investor-owned electric utility provides electricity for residential, commercial, and industrial sectors, serving 132,200 customers in 422 communities across Minnesota, North Dakota, and South Dakota. The company is headquartered in Fergus Falls, Minnesota, and has been in operation since 1909.

“Otter Tail sought to reduce its interim electric rate increase from 10.4 percent to 6.8 percent. Typical residential customers would see a reduction of about $3.10 a month, a company spokeswoman said, and business customers would see an $18.25 drop.”

The list is replete with similar examples of cost savings for small, family owned and operated businesses. These savings ensure that business owners can invest in new equipment, employ more people, and offer higher wages. The revised list of utility companies sharing the benefits of tax reform is below:

  1. Alabama Power
  2. Alaska Electric Light and Power
  3. Alliant Energy, Wisconsin
  4. Alpena Power Co.
  5. Ameren Illinois
  6. Appalachian Power Co.
  7. Arizona Public Service
  8. Atlanta Gas Light Co.
  9. AVANGRID
  10. Avista Corporation
  11. Baltimore Gas & Electric
  12. Black Hills Energy
  13. California Water Service
  14. Citizens’ Electric Company of Lewisburg
  15. Cleco Corporation.
  16. College Utilities
  17. Commonwealth Edison
  18. Consumers Energy
  19. Delmarva Power
  20. Dominion Energy, Utah
  21. DTE Energy
  22. Duke Energy Carolinas and Duke Energy Progress 
  23. Duke Energy Florida
  24. Duke Energy Kentucky, Inc.
  25. Duke Energy Ohio, Inc.
  26. El Paso Electric Company
  27. Enstar Natural Gas Company
  28. Entergy Arkansas
  29. Entergy Louisiana
  30. Entergy Mississippi
  31. Entergy New Orleans
  32. Entergy Texas
  33. Eversource Energy
  34. Georgia Power
  35. Golden Heart Utilities
  36. Green Mountain Power
  37. Gulf Power Company
  38. Hawaiian Electric, Maui Electric, Hawai’I Electric Light
  39. Idaho Power
  40. Illinois American Water
  41. Indiana-Michigan Power
  42. Iowa American Water Co.
  43. ITC Holdings Corporation
  44. Kansas City Power and Light
  45. Kentucky Utilities
  46. Louisville Gas and Electric Company 
  47. Madison Gas & Electric
  48. Metropolitan Edison Company
  49. Michigan Gas Utilities Corp.
  50. MidAmerican Energy Company
  51. Missouri American Water
  52. Montana-Dakota Utilities Co.
  53. National Fuel Gas Distribution Corporation
  54. National Grid
  55. National Grid Rhode Island
  56. Nevada Energy
  57. New Jersey American Water
  58. New Jersey Natural Gas
  59. Nicor Gas
  60. Northern Indiana Public Service Company
  61. Northern States Power
  62. NorthWestern Energy
  63. Oklahoma Gas and Electric Company
  64. Oncor Electric Delivery
  65. One Gas Inc.
  66. Otter Tail Power Co.
  67. Pacific Power
  68. PacifiCorp
  69. PECO Energy Company
  70. Pennsylvania Electric Company
  71. Pennsylvania Power Company
  72. Pennsylvania-American Water Company
  73. Pennsylvania-American Water Company-Wastewater
  74. Peoples Gas Company LLC
  75. Peoples Natural Gas Company LLC-Equitable Division
  76. Pepco
  77. Pike County Light & Power Company
  78. PPL Electric Utilities Corporation
  79. Public Service Company of New Mexico
  80. Public Service Enterprise Group
  81. Puget Sound Energy Inc.
  82. Quadvest
  83. Rocky Mountain Power
  84. SEMCO Energy Gas Co.
  85. Southwest Gas
  86. Spire Inc.
  87. Superior Water, Light & Power
  88. Tampa Electric
  89. The United Illuminating Company
  90. Tucson Electric Power Company
  91. UGI Central Penn Gas Inc.
  92. UGI Penn Natural Gas Inc.
  93. UGI Utilities Inc.
  94. Upper Michigan Energy Resources Corp. (UMERC)
  95. Upper Peninsula Power Company
  96. Vermont Gas Systems, Inc. 
  97. We Energies
  98. Wellsboro Electric Company
  99. West Penn Power Company
  100. WeStar Energy
  101. Xcel Energy

View full list of companies giving benefits here: https://www.atr.org/list

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New Hampshire shouldn’t expand renewable subsidies on the backs of ratepayers

Family Businesses for Affordable Energy believes that New Hampshire ratepayers should not subsidize unsustainable and inefficient energy producers of any type and encourage the New Hampshire Senate to reject SB 446 in its current form. SB 446 would significantly expand the state’s net metering program by increasing amount of excess power solar producers can sell back to the utility company from 1 megawatt to 5 megawatts. In addition to exponentially expanding the net metering subsidy, the bill also propped up New Hampshire’s six remaining biomass plants with ratepayer money. SB 446 was on the brink of passage before legislators raised concerns regarding the tax consequences of the legislation. The subsidies for biomass were defended on the basis that those facilities are unable to compete against plants that run on natural gas and other lower-cost fuels. Ratepayers across the state would see a yearly increase of $20 million a year to prop up the plants. The House Science, Technology, and Energy Committee unanimously agreed to an amendment that eliminated biomass generators from the bill with the promise of subsidizing them via two other energy bills being considered. Representative Michael Harrington sponsored an amendment to reduce the rate for projects over 1 megawatt, which ultimately failed. The amended bill will now be sent back to the Senate. FBC opposes this bill because it perpetuates government support of favored electricity producers, forcing the rest of the market to subsidize expensive and inefficient technologies.

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Tax reform is lowering energy bills across the nation

Tax reform has had transformative effect on businesses across the country. Regardless of size or structure, the reduced tax rates, added simplicity, and increased flexibility has had a net benefit for Main Street job creators. Skeptics need look no further than the ever-growing list of companies that reinvesting and offering bonuses to employees to see that the Republican tax plan is achieving the desired effect. Listed amongst the businesses that are giving back on the heels of tax reform are electrical utilities. At present, electrical utilities in 41 states, and more than 82.3 million customers nationwide have reduced rates on electricity. Consumers across the country are reaping the energy savings benefits of tax reform. The billions in tax savings to utility customers is providing significant infusions into the economy. More importantly, the tax cuts have had a cascading effect, empowering utility companies to track their tax savings and investigate ways to pass those on to customers. This week, state regulators in Ohio and Minnesota are petitioning utilities in their states to find savings, and in early March, Georgia Power and New Jersey Natural Gas announced rate reductions and refunds that counted in the billions of dollars in savings for ratepayers.  “Reduced tax costs create an opportunity for BGE customers to benefit from further decreases in their total energy bills,” said Calvin G. Butler Jr, chief executive officer of BGE in a January 2018 Baltimore Gas & Electric press release. For family businesses, lower electricity rates are great news, particularly for the inventory-rich, cash-poor enterprises that operate on slim margins. For these businesses, every dollar counts, and high, or volatile energy costs can be detrimental to prosperity. Conversely, lower, predictable energy costs result in savings that can be reinvested in the business. This means that business owners can hire more employees, invest in new equipment, and offer staff higher wages. A partial list of companies reducing energy prices is below:

  1. Alaska Electric Light and Power (Juneau, Alaska)
  2. Ameren Illinois (Chicago, Illinois)
  3. Arizona Public Service (Phoenix, Arizona)
  4. AVANGRID (Orange, Connecticut)
  5. Avista Corporation (Spokane, Washington)
  6. Baltimore Gas & Electric (Baltimore, Maryland)
  7. Black Hills Energy (Rapid City, South Dakota)
  8. Cleco Corporation. (Pineville, Louisiana)
  9. Consumers Energy (Jackson, Michigan)
  10. Dominion Energy (Utah)
  11. DTE Energy (Detroit, Michigan)
  12. Duke Energy Florida (St. Petersburg, Florida)
  13. El Paso Electric Company  (El Paso, Texas)
  14. Enstar Natural Gas Company (Anchorage, Alaska)
  15. Entergy Arkansas (Little Rock, Arkansas)
  16. Entergy Louisiana, LLC (New Orleans, Louisiana)
  17. Entergy Mississippi (Jackson, Mississippi)
  18. Eversource Energy (Boston, Massachusetts)
  19. Georgia Power (Atlanta, Georgia)
  20. Green Mountain Power (Colchester, Vermont)
  21. Gulf Power Company (Pensacola, Florida)
  22. Hawaiian Electric, Maui Electric, Hawai’I Electric Light (Honolulu, Hawaii)
  23. ITC Holdings Corporation (Novi, Michigan)
  24. Kansas City Power and Light (Kansas City, Missouri)
  25. Louisville Gas and Electric Company and Kentucky Utilities Company  (Louisville, Kentucky)
  26. National Grid (Waltham, Massachusetts)
  27. National Grid Rhode Island (Providence, Rhode Island)
  28. New Jersey Natural Gas (Wall, New Jersey)
  29. Northern Indiana Public Service Company (Merrillville, Indiana)
  30. NorthWestern Energy (Butte, Montana)
  31. Oklahoma Gas and Electric Company (Oklahoma City, Oklahoma)
  32. Oklahoma Gas and Electric Company (Oklahoma City, Oklahoma)
  33. Oncor Electric Delivery (Dallas, Texas)
  34. Pacific Power (Portland, Oregon)
  35. Pepco (Washington, DC)
  36. Public Service Company of New Mexico (Albuquerque, New Mexico)
  37. Rocky Mountain Power (Portland, Oregon)
  38. Spire Inc. (St. Louis, Missouri)
  39. The United Illuminating Company (New Haven, Connecticut)
  40. Tucson Electric Power Company (Tucson, Arizona)
  41. Upper Peninsula Power Company (Marquette, Michigan)
  42. Utility Services of Alaska (Fairbanks, Alaska)
  43. Vermont Gas Systems, Inc. (South Burlington, Vermont)
  44. WeStar Energy (Topeka, Kansas)

View full list of companies giving benefits here: https://www.atr.org/list

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FBAE supports Kentucky Net Metering legislation – House Bill 227

In January, Kentucky Energy and Natural Resources Committee Chairman Jim Gooch introduced a bill that would amend the compensation rate for solar users who sell the excess power they produce back to the utility companies. The 14-year-old system compensates solar users at the full retail price of the electricity, versus the wholesale price for these sales. This practice ultimately shifts costs to non-solar customers. While criticisms of net metering often center around the adverse effects on low-income individuals, evidence shows that the problem also extends to the majority of small businesses who don’t want or can’t afford solar. FBAE all business owners should fairly share in the fixed costs necessary to maintain the energy grid.

FBAE drafted a letter to the Kentucky Legislature, supporting Chairman Gooch’s legislation, H.B. 227. The bill will amend Kentucky’s net metering compensation system by paying producers at the wholesale rate instead of the full retail rate they currently enjoy. Additionally, the bill is not retroactive, and will not affect current users in the state.

Kentucky Net Metering Letter March 2018

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Offshore Energy Exploration Could Be The Next Bakken Oil Boom

Despite the United States being mired in a national recession, the state of North Dakota enjoyed the nation’s lowest unemployment rate and a billion-dollar budget surplus in 2012. North Dakota’s prosperity was achieved because the state was allowed to utilize new energy extraction technology to recover readily available deposits of oil and natural gas.  In 2018, America may be on the cusp of the next energy boom, and this one has the potential to benefit business owners and individuals nationwide. On January 4th, the Trump administration announced a draft proposal to offer large swaths of offshore terrain comprising nearly 90% of the United States’ outer continental shelf to commercial oil and gas drillers. The move will be a reversal of President Obama’s 2016 decision to indefinitely block oil and natural gas exploration from the unleased offshore locations surrounding the continental United States and Alaska. In what will potentially be the largest lease sale ever, Interior Secretary Ryan Zinke said the draft proposal would offer leases to nearly 1 billion acres to drilling companies between 2019 and 2024. Currently, the Bureau of Offshore Energy Management (BOEM) permits offshore drilling in federal waters off the coasts of Alabama, Mississippi, Louisiana, Texas and parts of Alaska and California. BOEM currently manages about 2,900 active OCS leases, covering almost 15.3 million acres – the vast majority in the Gulf of Mexico. Fully implemented, Trump’s offshore exploration proposal would give energy companies access to leases to more than a billion offshore acres.

While offshore drilling projects would generate billions of dollars in revenue for state and local governments, the economic benefits extend to far beyond enriching the federal government and drilling companies. Offshore exploration saves money for taxpayers, supports hundreds of thousands of jobs, reinforces our national security, and reduces the cost of energy for both individuals and businesses nationwide. Each year, small businesses collectively spend more than $60 billion on energy. Ten percent of small-business owners claim that energy is their single greatest cost – greater than wages, salaries, materials, and supplies. According to NFIB’s Energy Consumption poll, energy costs are one of the top three expenses for 35% of small businesses. Increased access to offshore leases will undoubtedly reduce energy costs by increasing supplies, driving down energy costs for America’s job creators. However, the economic benefits of offshore energy exploration extend beyond cost savings. According to the American Petroleum Institute, opening our coasts to offshore drilling would lead to over 450 billion in new private sector spending, creating over 840,000 new jobs across the country.

Offshore exploration is also good for the government, with projections generating more than $200 billion in cumulative revenue. It is projected that opening unleased waters to offshore drilling will contribute more than $70 billion per year to the U.S. economy. North Dakota’s fracking boom, offers a pertinent illustration of what happens to communities when energy companies can invest. Invariably, private investment flows into communities, and local economies begin to thrive. Skeptics need look no farther than the massive economic boom that came with Bakken energy exploration, which plummeted North Dakota to 2.4% unemployment. The state now ranks sixth in best states for infrastructure. Fracking investment has helped North Dakota’s small businesses by creating opportunities across the state. Furthermore, fracking has made energy bills in North Dakota some of the lowest in the nation. Gas bills plummeted $13 billion per year from 2007 to 2013 because of increased fracking, which adds up to $200 per year for gas-consuming households. Moreover, all types of energy consumers, including commercial, industrial, and electric power consumers, saw economic gains totaling $74 billion per year from increased fracking.

Similarly, expanding drilling to America’s costs will bolster our economic and national security and provide states vital revenue and jobs that are needed to meet the increasing costs of state budgets. Many states, particularly those on the Atlantic Coast, lack dedicated infrastructure to support drilling operations, which provides an opportunity for businesses across the country to deliver the human and material substructure needed to support exploration efforts. FBAE believes that energy production is not only critical to our economic and national security but also keeps the lights on and energy costs low for main street job creators. It’s time for a pragmatic approach to our energy policy, and opening America’s offshore regions to energy exploration would be a bold step towards lasting economic prosperity for states governments, businesses, and consumers.

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ITC Shouldn’t Pick Winners & Losers in Solar Markets

Last month, the International Trade Commission ruled in a 4-0 decision that imported solar panels threatened the future of domestic manufacturing of solar components. The decision came after two solar manufacturers, Suniva and SolarWorld Americas petitioned the commission for tariffs. Suniva, which is 63-percent owned by a Chinese company, and SolarWorld Americas, whose parent company is a German firm, specifically requested a “40-cent-per-watt duty on imported cells and a 78-cent-per-watt floor price for imported modules. In lieu of the petition, the ITC has issued tariff recommendations that now await President Trump’s decision to implement within 60 days.

The commissioners offered three different recommendations, but it will be up to President Trump to decide on which recommendation to follow or to make completely new recommendations of his own.

  • On the high end of the recommendations made by the ITC, the commission’s chairperson recommended a 35-percent tariff on all imported solar modules, as well as a four-year tariff of 30 percent on solar cell imports exceeding 0.5 gigawatts and a 10-percent tariff on cell imports under that limit. The tariffs would decline gradually.
  • The intermediate recommendation suggested a 30-percent tariff on modules and a 30 percent tariff on imported solar cells more than 1GW. This tariff would also gradually decline.
  • The third and most relaxed recommendation came from one commissioner who recommended a four-year import quota system that allowed 8.9GW of solar modules and cells to be imported in the first year.

Earlier this year, the solar advocacy group SEIA, which represents 1,000 solar industry companies worldwide, stated that Suniva’s requested tariffs could cause the industry to lose 88,000 jobs next year alone, more than one-third of the industry’s entire workforce. Many US-based solar companies would be negatively impacted by a tariff, specifically those that conduct R&D domestically, but manufacture abroad. A coalition of pro-free trade conservative groups joined SEIA in opposition to solar tariffs. Additionally, in April, a bipartisan group of 69 members of Congress Friday sent the ITC a letter urging the commission to reject the request from Suniva and SolarWorld.

While FBAE has stood as a staunch opponent of taxpayer giveaways to the solar industry, we also believe that the import cost of solar panels should be governed by the free market, not the ITC. This means allowing the market and the consumer to determine the success or failure of enterprise instead of using the government levy favorable tariffs at the behest of specific companies. Tariffs and import restrictions reduce employment and drive up prices for consumers.  Furthermore, pro-tariff policies have a negative impact on blue-collar American workers in rural communities and increase the cost of electricity on businesses and families who utilize solar. For solar power to become a truly self-sufficient and economically viable energy source, the government should avoid picking winners and losers – penalizing some companies over others.

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DOE grid study provides insight into grid reliability

Last April, Energy Secretary Rick Perry request a study of America’s electric grid to examine potential problems and solutions to maintain reliability. The study is of particular importance to family businesses who rely on affordable and reliable sources of electricity to run their businesses. Secretary Perry called for the study to not only examine the effects of renewable energy on the grid, but also develop policy prescriptions to help govern future energy production. Specifically, Secretary Perry sought to understand whether further increases in intermittent renewable energy sources would affect the reliability of the electrical grid and endanger base load power sources. Fears surrounding the study’s findings surfaced on both sides. Utility companies levied reasonable apprehensions about potential federal preemption of state energy policies on national security grounds.  Exelon CEO Chris Crane made the case for a diverse energy portfolio and emphasized that nuclear energy’s contribution to baseload power generation was being “squeezed” and that the elasticity of nuclear energy made it an integral part of the power grid.  Crane’s concerns are well founded. States like California have already begun to phase out nuclear energy production in the state.

Expectedly, in an attempt to head-off any criticisms of the reliability of renewable energy national green energy business associations like the Advanced Energy Economy, American Council on Renewable Energy, American Wind Energy Association, and Solar Energy Industries Association flooded the DOE with research arguing that the inclusion of more renewables in the power mix would have a measurable effect on system reliability. When the 154-page report was finally released late August, some environmentalist activists predictably belittled the study as a full-blown war on renewables and claimed that the study’s findings were a direct contradiction of what “other energy experts were saying” while others praised it as a fairly well-evidenced overview of the energy markets as they currently stand. Tom Kuhn, the President of Edison Electric Institute, which represents all U.S. investor-owned electric companies stated, “While we are still thoroughly reviewing the study, EEI has long advocated that our customers are best served by public policies that promote a balanced and diverse energy mix, which includes both traditional and renewable energy sources, and that also recognize the vital role 24/7 energy sources play in sustaining a secure, reliable, and resilient energy grid.” Kuhn went on to affirm the importance of energy production as an integral component of a robust infrastructure network that deserved investment, specifically pointing out the importance of defending energy infrastructure in the face of both man-made and natural disasters.

Ultimately the study details a few key findings. First, that market forces are driving baseload retirements, specifically the low price of natural gas as the largest contributor to maintaining older base load power plants. Nevertheless, the study indicated that coal, oil, and nuclear power generation still faces threats under the current market conditions, specifically with the difficulty in covering fixed costs in a market environment with cheap natural gas, subsidies for renewable energy sources, and government-mandated renewable energy goals. The report also pointed out the resiliency of coal-fired power plants and the stability associated with coal prices in comparison to the volatility of natural gas, as a positive for the continued use of coal power plants as part of base load production.

Our future energy grid must rely on sources capable of providing continuous output for base load power partnered with economically stable sources of electricity during peak load hours.  States should examine their current goals, mandates, and subsidies for renewable energy production to ensure reliability and fair economic competition with base load production. We look forward to working with states to ensure family businesses are provided with affordable and reliable energy sources.

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Keep political activism out of New Yorkers’ pensions

Activist investors have been on the rise in recent years, but their latest target on behalf of left wing environmentalists puts every day New Yorkers’ pensions in trouble.

New York state lawmakers are currently considering a proposal offered by state Sen. Liz Krueger that would mandate the state comptroller to begin divesting all state pension funds from energy companies producing coal, oil and natural gas by 2022. With New Yorkers already facing the highest state-imposed tax burden in the nation, and their state pension system confronting $250 billion in unfunded liabilities, it’s shocking that Albany would consider a measure as onerous to taxpayers as the New York State Fossil Fuel Divestment Act.

The state’s retirement fund is currently 92 percent funded, a shortfall of approximately $5,000 per private sector worker. If the divestment movement is successful, the loss from expected growth could reach the trillions in coming decades. New York Comptroller Thomas DiNapoli has come out against the bill. A Democrat and self-avowed environmentalist, DiNapoli is tasked with being the chief financial officer for the state, and now must weigh special interest activism against the creditworthiness of pensions for New York’s police, first responders, and other public employees.

If Krueger’s measure were to become law, the very people that the pension fund is designed to support would be most negatively affected. An arbitrary decision to divest from traditional energy companies will only increase unfunded liability gap, putting stress on the state’s ability to deliver on its promises to public employees.

A recent study conducted by University of Chicago Professor Daniel Fischel found that pension holders would see New York City’s funds shrink by over $100 million annually, and that divestment would have “minimal or no environmental impact.” New York City Employee Retirement System (NYCERS) alone would lose between $41 and $60 million annually; this adds up to nearly $700 billion over the next 50 years. Decreased returns on investment coupled with the ensuing wave of tax increases intended to offset the shortfall would undoubtedly land on the laps of many of the state’s workers. By rejecting this misguided legislation, New York lawmakers will be protecting public employees and workers statewide.

A burgeoning divestment movement is cropping up across the country, and New York is the latest example. Legislators across the country should follow the lead of Comptroller DiNapoli and keep political activism out of the pension system, focusing instead on driving returns that will ensure promises made to state retirees are promises kept.

Read at: http://www.stargazette.com/story/opinion/2017/08/20/yo-political-activism-ny-pensions/104723192/

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Blog: Pennsylvania Marcellus Shale Tax

Last month, the Pennsylvania state Senate voted in favor of a massive tax increase as part of a plan to close the state’s $2 billion budget gap. The 26-24 vote will result in a tax hike of 571.5 million across the state, affecting over half of households in the form of increased heating bills. While the tax hike will be a great revenue raiser for the government, small businesses will face an uphill battle in the form of fewer jobs, and the suppression of the state’s newest and most vibrant revenue stream. The vast majority of the tax hike is targeted at the state’s booming natural gas industry. The nation’s largest natural gas field, the Marcellus Shale, is located in Pennsylvania. The new severance tax will raise an estimated $100 million each year with an effective tax rate for 2017-18 of 2 cents per thousand cubic feet of natural gas. The state’s natural gas industry has been a target of Pennsylvania Governor Tom Wolf throughout his tenure as Governor. In February, he proposed a 6.5 percent tax on the value of the production. In 2015, he had proposed a 5 percent production tax, plus 4.7 cents per thousand cubic feet. Despite the fact that Governor Wolf has been forced to settle for roughly half of his desired tax rate, there are still significant problems with targeting the natural gas industry. The severance tax is far from the steady revenue source needed to reduce the deficit. The natural gas industry is cyclical with periods of robust growth and decline. No one knows how long the state can depend on revenue from the Marcellus Shale developers. Supporters of the tax have pointed to the fact that Texas also levies a similar tariff on their natural gas. However, as Elizabeth Stelle from the Commonwealth Foundation points out,

If Texas is really the model to follow, then any severance tax proposal should also include eliminating the corporate income tax, eliminating the personal income tax and streamlining Pennsylvania’s regulatory regime. Sadly, that’s not the type of severance tax the governor and lawmakers want. Their idea is to raise the special tax charged to drillers—now called an “impact fee”—when the industry is already struggling with year-long permit delays for permits that do not even exist across the border in Ohio, ongoing litigation to build critical infrastructure, and the highest effective corporate tax rate in America.”

With Pennsylvanians already paying increased taxes and regulatory costs, it’s unfair to levy an additional burden on energy producers. Onerous government-imposed tariffs exist outside the free market, and not only distort the cost of labor, but tangible goods as well. Instead of clobbering hard-working Pennsylvanians with yet another tax increase, we encourage Governor Wolf to leverage the Marcellus Shale for greater investment that will create jobs.

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