Use free market, not tax breaks, to promote use of natural gas

Monday, February 6, 2012

So we want to see the nation switch more of its motor vehicle fleet to natural gas, and more of its electricity generation to natural gas.
What ought we to do?
"Tax break! Tax break!" squawks the Obama administration, echoed by incumbent members of Congress of both parties.
That, folks, is stupid.
Thanks to the recent production of natural gas from the Marcellus Shale layer, and recent and expected production from other deep layers of shale and sediment including the Utica, the price of natural gas is falling like the Times Square ball at midnight on New Year's Eve/Day.
The market will encourage the switch to natural gas.
Tax breaks for an already undertaxed, overly profitable industry are not needed, and ought not to be enacted, especially not as graft, grift, corruption and collusion in return for political contributions, direct or indirect.
When the government gets involved in "encouraging" something, bad things usually happen. Hasn't the Obama administration learned its lesson from its hundreds-of-millions subsidy of a once-promising solar panel manufacturer, a company that went bankrupt?
Government needs to set the infrastructure conditions for level playing fields and free markets, then get out of the way.
In Pennsylvania, that means a 5 percent or so tax on royalties from natural gas extracted from the Marcellus shale - and from any well, as well as a reasonable, broad-based and fair severance/extraction tax on coal, oil, gravel, sand, anything that is mined.
We do not need that tax to prop up state general spending. We can pay for general spending through taxes on income, etc., once we, in effect, "declare bankruptcy" to shed $1,500-a-household increased taxes needed to prop up overly generous and unaffordable teacher pensions.
We do need taxes on extracted oil, gas, minerals etc. to help to mitigate the costs of extraction to governments, ranging from direct (paying for state inspectors and regulation) to indirect (strain on schools, roads, etc.).
And we need taxes to underwrite cleanup funds so that, 50-100 years from now, we are not cleaning up the oil-gas equivalent to the acid mine drainage legacy of the last century. We need to plug the thousands of abandoned wells that now permeate Pennsylvania's landscape, providing dangerous conduits for oil, gas, brine, poisons, drilling fluids, etc., disturbed by hydraulic fracturing.
But we don't need to give tax breaks to the millionaire and billionaire companies now extracting natural gas, or to utilities or manufacturers eager to convert.
The possibility of making megabucks from cheap natural gas is incentive enough.
- Denny Bonavita