Why Pennsylvania’s Act 13 May Be the Nation’s Worst Corporate Giveaway
Pennsylvania, where the Declaration of Independence and U.S. Constitution were signed and where the U.S. coal, oil and nuclear industries began, has adopted what may be the most anti-democratic, anti-environmental law in the country, giving gas companies the right to drill anywhere, overturn local zoning laws, seize private property and muzzle physicians from disclosing specific health impacts from drilling fluids on patients.
The draconian new law, known as Act 13, revises the state’s oil and gas statutes, to allow oil companies to drill for natural gas using the controversial process known as hydraulic fracturing or fracking, where large volumes of water and toxic chemicals are pumped into vertical wells with lateral bores to shatter the rock and release the hydrocarbons. The law strips rights from communities and individuals while imposing new statewide drilling rules.
“It’s absolutely crushing of local self-government,” said Ben Price, project director for the Community Environmental Legal Defense Fund, which has helped a handful of local communities—including the city of Pittsburgh—adopt community rights ordinances that elevate the rights of nature and people to block the drilling. “The state has surrendered over 2,000 municipalities to the industry. It’s a complete capitulation of the rights of the people and their right to self-government. They are handing it over to the industry to let them govern us. It is the corporate state. That is how we look at it.”
“Now I know what it feels like to live in Nigeria,” said recently retired Pittsburgh City Council President Doug Shields. “You’re basically a resource colony for multi-national corporations to take your natural resources, take them back to wherever they are at, add value to them, and then sell them back to you.”
Needless to say, Pennsylvania’s top political leadership—Republican Gov. Tom Corbett and Republican-controlled legislature—see Act 13 as a pro-business, clean-energy bill creating jobs, revenue and improving environmental laws surrounding drilling. That the 174-page bill was essentially rammed through the legislature over objections from local officials, environmentalists and a handful of legislators who said it not only turned “300 years of local zoning upside down,” but exposed the state to liability from wells, was irrelevant. “This growing industry will provide new career opportunities that will give our children a reason to stay here in Pennsylvania,” Corbett said, when signing the bill into law on February 14. It takes effect 60 days later.
“A lot of local officials, Republicans and Democrats, have begun to drill into this bill and… are really coming to the conclusion that in their zeal to carry the water for the gas and oil industry people, that they really overreached,” said Shields, who predicted that it was only a matter of weeks before the first legal challenges were filed. “This is really wrangling them. Maybe they are all for oil and gas drilling. And maybe they don’t care about the environment. But they sure as heck care about their power.”
Money Talks, Republicans Walk
Pennsylvania’s history has been filled with energy booms, busts, and boondoggles. The nation’s first large coal mines were there. The first oil wells were drilled in Pennsylvania in 1859. The nation’s first nuclear power plant opened there in 1957. The nation’s worst commercial nuclear accident occurred there in 1979. In between these cycles, this largely mountainous and farming state has struggled economically. This is especially true in the rural areas where upwards of 200,000 wells remain from decades of drilling and mining.
The oil and gas industry has always known that almost all of Pennsylvania except for its southeast corner sat above three formations of shale, known as the Marcellus, Devonian, and Utica, which contain some of the world’s largest natural gas reserves. (These same formations extend into eastern Ohio and western New York.) A decade ago, the US Geological Survey released estimates of these reserves, suggesting a sizeable portion of America’s natural gas needs could be met if they were tapped. Pennsylvanians saw the prospect of millions in investment capital pouring into their beleaguered state.
The USGS announcement prompted a major restructuring by American gas producers who saw a once-in-a-lifetime opportunity. Texas-based firms such as Range began dumping thousands of acres of other drilling leases and came into the state with a multi-prong strategy to make new fortunes. Initially, the industry started approaching property owners to lease their land for long-term drilling. Then it targeted the legislature to rewrite the state’s oil and gas laws.
The industry needed the legislature to rewrite those laws because a 2009 decision by the Pennsylvania Supreme Court upheld municipal rights to write zoning laws that excluded oil and gas drilling if it did not fit the community’s “character” and “special nature.” The oil and gas industry did not want to file a suit every time it wanted to drill. By late last year, private companies such as Range Resources acquired 125,000 acres of leases in Washington County, its executives reported in a recent conference call to Wall Street analysts. In total, the firm has 790,000 acres under lease, mostly in Pennsylvania.
In that call to analysts, Range Resources’ executives described the enormous financial stakes in Pennsylvania—which have driven the state’s current political response.
The return on investment on some Marcellus wells was “73% to 99%,” senior managers boasted. The fracking wells cost about $4 million each. In contrast, Act 13’s new impact fee, which the state is charging to offset costs such as wear on roads and bridges, is about $50,000 per well, apart from other state-required bonds. The firm’s officers, who sold other gas holdings to focus on Pennsylvania, predicted, “in 2012, our organic growth target is expected to be 30% to 35%” and “if we chose to live within cash flow, we can still grow at 15% to 20% a year.”
These profit margins are among the largest of any major American industry, even if they have been inflated to lure investors. The firm is worth “more than $10 billion,” the executives said. Yet it is only one of the large gas companies that have come into the state, where, as of January 12, the Department of Environmental Protection has issued 5,751 permits and 2,891 wells have been drilled.
Pennsylvania’s Republican leaders did not need to be pushed to comprehensively rewrite its oil and gas laws in nearly 30 years. Working with the industry, they drafted a 174-page bill they touted as moving Pennsylvania toward energy independence while protecting the environment. Their legislation was presented to legislators in January, quickly passed largely on party lines, and was signed within weeks. The bill’s critics were ignored. Democrats said they could not muster the votes to stop it.
“This was all done in the backroom—and it was written by the oil and gas industry,” Shields said, pointing to fine print such as the confidentiality strictures for doctors who treat any patient that might be exposed to drilling fluids. “Where the hell does physician confidentiality come from? There isn’t a legislator up there that would ever have thought of that. But a good corporate lawyer will figure that out because they don’t want that to affect them in lawsuits. They know we will be coming because they know we will have spills and accidents and people are going to get hurt. They don’t want to give them a leg up.”
Creating Corporate Rights
Act 13 does many things to elevate the rights of gas companies above the civil rights of people and communities. To start, it revokes local zoning authority to discourage oil and gas development, stating, “this section pre-empts and supersedes the local regulation of oil and gas operations” (page 162). Municipalities can adopt some rules on how drilling is to be done, but they cannot say no to drilling. Moreover, the law tells municipalities that they must revise their local ordinances to allow drilling if they want to receive payment under the new per-well impact fee.
But pre-empting local zoning is only the start of Act 13’s heavy-handed approach. The law empowers the state’s Public Utilities Commission—a body of appointed, not elected officials—to overturn local zoning, and to determine if a community is eligible to share in impact fee revenues. Moreover, if a gas company or any individual does not like a local law that affects drilling, that “aggrieved” party can go to the PUC and the board will be required to “determine whether it violates” the new state oil and gas law (page 167).
In other words, the PUC will use state authority to help the industry achieve its aims.
“What they are saying is if you don’t allow us to do what we want in your communities that you won’t share in the benefit monetarily—so it is almost like a bribe,” said Steve Karas, Forest Hills Borough vice-president, whose community, like nearby Pittsburgh, recently adopted a local ordinance asserting environmental and community rights. “We are not against natural gas. We are not against drilling. We are against the imposition of something that we feel has not been proven safe yet. We talk about public safety all the time in meetings… Part of the public safety is not allowing toxic chemicals to A, poison our water supply, and B, not be treated correctly.”
The law also gives the industry the power to seize private property for any part of a drilling operation. On page 65, it states, “a corporation empowered to transport, sell or store natural gas or manufactured gas in the Commonwealth may appropriate an interest in real property” for “injection, storage and removal” of hydrocarbons. However, it does not require the industry to notify any town government of leases it has acquired or of a future interest in using any property—for say, a pipeline or processing facility. Neither homeowners nor other businessmen seeking to develop property are protected if the gas industry intends to use their land.
“That’s what really concerns them,” Shields said. “Let’s say I have a developer who wants to put a shopping plaza or strip mall in my township. Say one party owns the surface—and it is a split estate and someone else owns the mineral rights. You don’t have any notice of what’s going on with leasing activity. No one is sending you a copy of the lease or the deeds. And you are moving down the road with your developer and then all of a sudden the oil and gas company comes in and says, “Oh, you can’t do that. We’re gonna drill here,’ or, ‘We’re gonna put two pipelines through that land.’ And you have nothing to say about it anymore as a local official.”
Late last year before it became law, the legislation’s critics included David Sanko, executive director of the Pennsylvania State Association of Township Supervisors, who said in December, “We oppose the total elimination of local control, including land use. Instead, we support the maximum possible retention of local decision-making authority to provide for the reasonable development of natural resources consistent with law.”
However, by early February and an approaching statehouse vote, Sanko’s organization changed its tune. He wrote to legislators saying, “We are equally pleased to have been able to thwart the 'nuclear-like' attack on local land-use decision making which would have resulted in a statewide, one size fits all total pre-emption of local decisions.” A call asking Santos to explain this reversal and interpretation of the law went unanswered.
The law also prevents heath professionals from discussing medical impacts. On page 99, it requires oil and gas companies to tell medical professionals what chemicals are used in drilling fluids—but only after they sign “a statement of need and a confidentiality agreement.” However those details—the chemicals in drilling fluid and medical significance—it states a page later, are secret and “shall not be a public record.”
“I know exactly why that is in there,” said Shields. “That makes it extremely difficult to bring a civil suit if the information is locked away behind confidentiality agreements. A physician can’t release information during discovery. They can’t even tell another patient that they are dealing with the same thing. They can’t go to a public health official and disclose it—this lady has benzene in her blood, or methyl-whatever. He can’t do it.”
These controversial aspects raise many constitutional issues that could become avenues for legal challenges, Shields and others have said. For example, empowering the PUC to override laws created by local officials raises serious jurisdictional issues. Additionally, giving eminent domain power to one industry raises constitutional questions about equal treatment under law, just as the confidentiality rules for physicians may violate their speech rights as an unconstitutional prior restraint.
The law takes effect April 14. But before then it is almost certain that not only environmental groups but aggrieved municipalities will sue to challenge sections of it and try to keep it from taking effect, Shields said. And while the law is seen as a pro-industry "model" for other states, CELDF’s Price predicted there would be a growing backlash once more Pennsylvanians learned how their civil rights have been subordinated to industry.
“The tables are turned,” Price said. “Americans aren’t used to being treated like they are the indigenous people being colonized. But that’s what’s happening.
Meanwhile, the industry sees few obstacles to drilling anywhere in the Keystone State.
“As you know, Pennsylvania recently passed legislation, which adopts an impact fee, better regulatory uniformity and enhanced environmental protection and safety regulations, all of which we believe are positive for the communities where we operate and for continued development of out acreage in Pennsylvania,” Jeffrey Ventura, Range Resources CEO, told Wall Street analysts in the February 22 call. Those were the briefing’s only remarks about the state’s politics.
The industry and state’s GOP leaders are assuming that the legal and political questions have been dealt with. But they are wrong. Though it is a long shot, a handful of towns and cities have been adopting community civil rights ordinances to keep drilling out of their locales. These are not the same as zoning laws—and they also says Pennsylvania’s state constitution is on their side.
“Pittsburgh is going to be the Gettysburg in this fight,” Shields predicted. “This will be the place where it will all go down.”