1. Marcellus Shale: the mother of all gas deposits Largest in North America Close to lucrative northeastern markets First Pennsylvania Marcellus well drilled in 2003 100% success rate Highly productive Profitable at $2.59 per thousand cubic feet (price last week @$6.43)

3. Potential Scale of Drilling in Marcellus One company projects drilling 17,000 wells Two companies project more than 7,500 in southwestern PA alone DCNR projects 5,000 to 6,000 on state land

4. Marcellus Shale Gas Benefits Private wealth – leases as high as $5,000/acre, royalties as high as 20% Generates revenues for the state Regional economic development in depressed areas Clean burning fuel – low carbon dioxide emissions

7. Environmental Impacts of Shale Gas Drilling Water withdraws Wastewater disposal Exposure to toxics Spills and leaks Ground and surface water contamination Erosion and sedimentation – CBF lawsuit Forest fragmentation

8. OOPS!

9. Community/Economic Impacts of Shale Gas Drilling Damage to local infrastructure Emergency preparedness Itinerant workforce Policing Incompatible with eco-tourism, hunting, fishing

10. Policy Debates Water quality standard – Total Dissolved Solids Regulatory oversight – HB 2155 Severance tax Drilling on public land – 690,000 acres now available for drilling Oil and Gas Lease Fund

11. Severance tax could be used to augment declining environmental funding

12. Changing severance tax rates has had little impact on production or drilling Data Source. West Virginia Geological and Economic Survey West Virginia added the $0.047 per MCF component of their tax on December 1, 2005. Both drilling and production appear unaffected by the change.

13. Severance and Business Taxes in Leading Natural Gas Producing States RankState2007 Natural Gas Production Current Severance Tax RateCorporate Taxes 1Texas6,091,7247.5% of market value of gas produced (reduced tax rate for "high cost wells“ ~ approx. 3.7%) Franchise Tax* 2Wyoming1,923,2246% of taxable value (gross sales minus certain processing and transportation costs) No 3Oklahoma1,744,3937% of average monthly price of gas plus 0.095% excise tax Income Tax 4New Mexico1,544,8308.67-9.5%, depending on county and school district Income Tax 5Louisiana1,363,538$0.331 per MCF (7/1/09 to 6/30/10 – reset each year) Income Tax 6Colorado1,242,5712% to 5% based on gross incomeIncome Tax* 7Alaska433,48525% to 50% of net incomeIncome Tax* 8Utah376,4095% when gas over $1.50 MCFIncome Tax* 9Kansas365,8774.33% (8% rate – 3.67% property tax credit)Income Tax* 10California307,160Conservation fee of $0.00880312 per MCFIncome Tax* 11Alabama270,4078% production tax and 4-8% privilege taxIncome Tax 12Arkansas269,8865% (Effective 1/1/09)Income Tax 13Michigan264,9075.25% (5% severance tax and 0.25% oil/gas fee)Income Tax* 14West Virginia231,1845% + $0.047 per MCFIncome Tax* 15Pennsylvania182,277NoneIncome Tax * - State uses combined reporting for corporate taxes

14. 35 states collected $16.7 billion in severance taxes in 2007-08 Source. U.S. Census

15. Severance taxes are common States in red have at least one severance tax – 35 in total

16. About half of the cost paid by consumers for natural gas is for transportation – a HUGE advantage for Marcellus Shale gas Source: U.S. Department of Energy, Energy Information Administration

17. Gas Price Wednesday 4/28 $4.18

18. Drilling Activity in Last 2 Years Source: Baker Hughes Rig Report (1/22/10)

19. Gas Leasing on State Forest Land More than 700,000 acres currently available for gas drilling, ½ the acres overlying deposit DCNR estimates 5,000 to 6,000 wells will be developed on leased acres HB 2235 – 5-year moratorium, study Oil and Gas Lease Fund

20. Marcellus drill site, Tioga State Forest, 10/01/09; photo courtesy of Dick Martin, PA Forest Coalition

22. Regulating Wastewater Discharges Proposed regulations on total dissolved solids set water quality standard, set discharge limits Before the Environmental Quality Board May 19 Goes to Independent Regulatory Review Commission mid-June Environmental Committees can pass resolutions to disapprove

23. What You Can Do This week – contact your representative in the State House and ask him or her to support HB 2235 which would put a moratorium on further leasing of state forest land for gas drilling Contact your state representatives and senators to ask them to support a severance tax. Contact members of the House and Senate Environmental Resources and Energy Committees and ask them to support the TDS standards.

24. Contact PennFuture www.pennfuture.org Info@pennfuture.org knapp@pennfuture.org