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The Money Game: Marcellus Shale Cash

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By William Ecenbarger

It might seem odd that Kim Pegula, a self-described "homemaker" from Boca Raton, Florida, would donate $180,000 to help state Attorney General Tom Corbett become the next governor of Pennsylvania.

To be sure, Ms. Pegula is no ordinary homemaker, but is responsible for an 8,000-square-foot, Tuscan-style estate in the exclusive St. Andrews Country Club that is currently on the market for $5.4 million.

But $180,000 is a lot of money, even in Pennsylvania politics, and it's a large gift, even if it did come two days before Christmas.

What could she have had in mind? Along with her husband, Terry Pegula, she is a founder of the Black River Music Group, an independent country music recording label that is home to such artists such as Jeff Bates and Sarah Darling.
But that doesn't seem like a good enough reason....

Oh wait! Terry Pegula is Terrance M. Pegula, the president, CEO and sole shareholder of East Resources, Inc., Warrendale, Pa., which owns about 900,000 acres and operates some 2,500 natural gas wells in the Marcellus Shale areas of Pennsylvania, New York, and West Virginia.

Some of the richest natural gas reserves in the world are here, and exploration companies like East Resources have been drilling ever more wells in northern and southwestern Pennsylvania. So far this year, new wells are being opened at three times the rate as last year.

And just as surely as the drilling is rising, so are industry contributions to Pennsylvania legislators and gubernatorial candidates.

A few years ago, oil and gas interests were negligible givers to Harrisburg politicians. Then, the Marcellus Shale was discovered and drillers are descending upon the state and oil and gas interests are opening their checkbooks to give to politicians.

No surprise here. The drillers are betting that their political bounty will influence the executive and legislative branches on issues like taxation, environmental regulations and a moratorium on drilling on state-owned land.

Studies upon studies have show that public office-holders tend to make decisions that favor those who have helped finance their elections to office. In politics, money not only talks - it practically shouts if given in large amounts.   

A study of reports filed with the Pennsylvania Department of State shows that in the 18-month period between January 1, 2009, and last June 30, drillers gave at least $751,762 to candidates-nearly triple their total of $276,802 for 2008.

One thing is very clear: the gas companies believe that their interests will best be served through the election of Republicans. Of the grand total of $1,028,564 contributed in 2008, 2009 and the first half of 2010, fully 82 per cent, or $843,884, went to Republican candidates.

Corbett accepted $311,803 in natural gas money while his Democratic opponent in the Nov. 2 gubernatorial election, Allegheny County Executive Dan Onorato, took $94,000. State Auditor General Jack Wagner, who lost to Onorato in the Democratic primary, received $26,250.

For the record, Corbett opposes taxing natural gas, saying it would hurt a fledgling industry.

Onorato has not taken a position on the issue.

The party disparity was more pronounced at the legislative level. House and Senate Republican campaign organizations received $66,600, while Democrats got only $2,000, and far more individual Republican candidates were favored than Democrats.  

Legislative leaders from both parties drew gas money, but again most of it went to Republicans. Tops in this class was Sen. Joseph B. Scarnati III (R., Warren), the Senate president pro tem, who got $42,250. By contrast, his leadership equivalent in the House, Speaker Keith R. McCall (D., Carbon), was given only $4,500.

The chairmen, and subcommittee chairmen and members of the key Environmental Resources and Energy Committees in both chambers also were targeted: Rep. Jeffrey P. Pyle (R., Armstrong ), $9,800; Rep. Dave Reed (R., Indiana), $7,250; Sen. Donald R. White, (R., Indiana), $6,000; Rep. Ted Harhai (D., Westmoreland), $4,750, and Rep. Michael Gerber (D., Montgomery), $3,500. (See more details here.)

The Pegulas' East Resources was the largest contributor among natural gas interests, with a total of $276,525 over the 2-1/2-year period, including $205,000 to Corbett.

Other big industry contributions:

--$116,600 from CNX Gas Corp., Canonsburg, Pa., which is producing gas on land in Greene County that is owned by Consol Energy Inc., a huge coal company.

-$68,640 from Chesapeake Energy Corp., Oklahoma City, a Fortune 500 company that is the largest single Marcellus stakeholder with 1.6 million acres.

-$61,600 from Range Resources Corp., Fort Worth, Texas, which has leased more than 1.1 million Pennsylvania acres.

-$58,307 from S. W. Jack Drilling, Indiana, PA., one of the largest land-based drillers in the U.S. (See more details here.)

Common Cause, the nonprofit that advocates for campaign reform, recently estimated that the Marcellus shale drillers have contributed $2.8 million to Pennsylvania candidates and political groups since 2001. The largest single contributor was S.W. Jack, which gave $990,000, or more than one third of the total. The chief executive officer of the company is Christine Toretti, who is also the Republican National Committeewoman from Pennsylvania.

Toretti announced in May that she was liquidating S.W. Drilling to invest in other, unspecified energy projects. But, as recent campaign reports filed in Harrisburg show, other companies are stepping up their generosity. What's in it for them?

There are many issues critically important to the industry that will be decided by the Legislature and the next Pennsylvania governor. Foremost is taxation-Pennsylvania is the only major gas-producing state that does not levy a severance tax on natural gas.

The industry has blocked a severance tax since early 2009, but the recently approved state budget commits the state to enact the levy to take effect on Jan. 1, 2011. The details of the severance tax, including the rate and distribution ratio between state and local governments, are supposed to be determined by the lawmakers this fall. So, it would not be a surprise if the campaign money keeps flowing.

There are also environmental concerns that must be addressed by the Legislature and the executive branch, especially the state Department of Environmental Protection, which issues drilling permits. Perhaps most troublesome is the impact of the drilling on drinking water.

The gas is a mile or more beneath the surface, and it can only be tapped by breaking up the shale rock with a high-pressure liquid spray that is a mix of water, sand and chemicals, some of which are toxic. This extraction process is known as hydraulic fracturing, or "fracking," and it has been implicated in polluting drinking water in other states

The other side of the coin is that the Marcellus Shale formation is estimated to hold as much as 50 trillion cubic feet of recoverable natural gas under Pennsylvania, New York and West Virginia. The drilling could bring about an economic boom in some of Pennsylvania's most troubled areas. In addition, natural gas is vital to the nation's energy needs.

A cautionary note: Because Pennsylvania's online campaign contribution database is cumbersome, tracing Marcellus Shale donors is an uncertain and difficult procedure. These totals are almost certainly incomplete.

Moreover, companies make contribution from multiple sources. For example, Pittsburgh-based Equitable Production Co. gave $53,550 in the names of five executives and one political action committee-EQT Corp PAC. And Toretti gave money both in her current name and in her former married name-Christine Olson.


William Ecenbarger is a reporter and  a regular contributor to Metropolis.




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