Rebuttal to Claims made by Sage Policy Group

Earlier this month Sage Policy Group of Baltimore released this report on what they understand to be the potential impacts of gas development on Western Maryland.

http://marcelluscoalition.org/wp-content/uploads/2012/03/MD-Marcellus-Study.pdf

 

On March 16, CitizenShale and others sent this rebuttal to the House Ways and Means Committee which must assess the impacts and related liabilities associated with gas development in proposing a severance tax rate for the state of Maryland.


We respectfully submit for your consideration some clarifications to the report prepared by the Maryland Petroleum Council for the General Assembly (“The Potential Economic and Fiscal Impacts of Natural Gas Production in Western Maryland”). We hope this proves useful in your deliberations on HB 907.

The study done for the petroleum council by Sage Policy Group of Baltimore falls broadly into three subject areas — potential job creation; potential tax windfalls from the economic activity generated by gas exploration and drilling; and estimates of the Marcellus gas reserve. Please find our responses in bold-faced below. 

No significant jobs studies for this industry have been conducted in Maryland, and Sage makes no attempt to calculate net gains — or net losses — by factoring in the inevitable economic and environmental impactsIn the absence of a Maryland-specific study, Sage, instead, attempts to extrapolate by using studies from nearby states. What is known is that a few dozen western Marylanders work in the industry and commute to job sites in nearby Pennsylvania or West Virginia. Sage, however, suggests that a drilling rig moving into Maryland from a nearby location in Pennsylvania would lay off the experienced workers in Pennsylvania to hire an all-new staff of Maryland residents. In fact, industry-sponsored studies often make similar claims and, not surprisingly, the tactic results in impressive “new job” numbers. Yet, for obvious reasons we do not find such projections credible.

For these and other reasons, benefits for Maryland wage-earners are not easily calculated. Sage does note, however, that Maryland’s “allure to the natural gas industry” (p. 7) is limited due to the small amount of gas thought to be underground here. This of course has enormous implications for royalties paid to lease-holders, if wells are eventually connected to pipelines, and for state and county severance and income taxes. Sage also makes no attempt to calculate net job gains — that is, jobs created in the gas industry minus jobs lost by damaging the region’s world-class tourism industry.

Make no mistake: exposing forested ecosystems to the industrialization required to create a gas industry in what is Maryland’s favorite mountain tourism area will have impacts. A report presented Feb. 27 by the Maryland Department of Natural Resources to the Governor’s Marcellus gas study commission notes that 90 percent of the leased acreage in Garrett County falls within a “priority resource” category such as a protected watershed or endangered species area. Therefore, estimating the size of the Marcellus reserve becomes crucial. Given the size of that reserve, are the certain impacts to the environment, and the reported community impacts occurring in nearby states worth the risks? 

New information shows the nation will likely derive far less gas from the Marcellus than was previously thought, and Maryland’s portion is a small fraction of that supply. A chart on page 9 of the Sage report references a U.S. Energy Information Administration contractor’s estimate from 2009 of the total U.S. Marcellus “technically recoverable resource” of 410 trillion cubic feet. In the much smaller type below the chart (Footnote 1), Sage reports that the 410 tcf was recently revised downward — dramatically so, to 141 tcf. This estimate was released in January, in EIA’s Outlook 2012It supposes that the resource could be exploited if money were no object; it includes all of the Marcellus gas, however difficult and expensive it might be to reach and pump out.

Before many wells were drilled, in the early stages of the Marcellus gas “boom” that started in 2005, various authorities had estimated the total U.S. Marcellus reserve far higher. But, in shaving roughly 60 percent off its most up-to-date estimate, EIA included more fact-based data from gas actually extracted at well sites, primarily in Pennsylvania and West Virginia.

We submit that the number which Ways & Means Committee members should focus on is the small type in the table on p. 9: 141 tcf. 

“Take-away” Point #1: America uses roughly 23 tcf of natural gas annually (Outlook 2012). Therefore, the EIA estimate of 141 tcf represents just a six-year national gas supply, at current consumption (141 tcf divided by 23 tcf)Clearly, this is a far cry from a resource capable of securing America’s “energy independence,” as industry supporters (and even many notable national politicians) like to say. Of course, such assertions are more plausible if an outdated estimate three times as large (410 tcf) is emphasized — as Sage does on page 9. 

“Take-away” Point #2: According to the U.S. Geological Survey (October 2011), Maryland’s portion of the national Marcellus gas estimate is .71 tcf — about ½ of 1 percent of the national total. That’s enough to power America with gas for a few days.

Many people are startled to learn there isn’t as much natural gas in Eastern America’s deep shales as they had heard. The explanation, partly, is that as more actual drilling experience occurs, scientists can revise estimates with more fact-based data.

We strongly urge that your committee have the facts when considering what rate of severance tax is right for Maryland. We thank you once again for the opportunity to address these issues.

Sincerely yours,

 
CitizenShale.org
Eric Robison
Board President
McHenry, Md.
Sierra Club, Maryland Chapter
Dave O’Leary
Chapter Chair

Savage River Watershed Association
John Fritts
President
Frostburg, MD

Trout Unlimited
Nicholas Weber
Chairman
Mid-Atlantic Council

Chesapeake Climate Action Network
Mike Tidwell, Executive Director

Takoma Park, MD 
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