Let’s be clear that House Speaker T.W. Shannon’s insistence the state continue to give costly taxpayer handouts to the oil and gas industry as the state faces budget constraints could have a major detrimental effect on the overall quality of life here.
Education funding has declined to what can only be perceived as catastrophic levels since 2008. The state’s prisons are dangerously understaffed. Many state workers have gone without raises for seven years. There are myriad of mental health initiatives that need to be implemented on the state level.
But Shannon, a Lawton Republican, wants to make permanent $175 million in tax breaks for horizontal oil and gas drilling. The tax credits are set to expire in 2015. According to the Tulsa World, Shannon recently said, “Some have suggested we should raise this tax or allow it to expire in order to bring more money into the general fund and grow government. I don't believe in the tax-more, spend-more approach.”
This type of conservative reasoning defies logic primarily because it’s merely an ideological statement and sloganeering. But it also ignores a basic reality: Oil and gas companies will drill here no matter what. That’s a given, and when there’s no more fossil fuels to suck out of the ground in Oklahoma, these companies will leave the state and never return, leaving only earthquakes and environmental damage in their wake.
Of course, Shannon has other motivations to argue his case. Oil and gas interests, including the Oklahoma Independent Petroleum Association and Chesapeake Energy, have been major contributors to his campaign funding. Shannon is up for reelection this year.
Meanwhile, Shannon will continue to push for income tax cuts next session, according to media reports, even though revenue predictions are not getting met on a monthly basis. The Oklahoma Supreme Court recently threw out last year’s tax cut bill because it violated the state’s constitutional single-subject rule for legislation.
Tax breaks for oil and gas companies along with stagnant or lowered funding for education. This conservative model of governance ultimately only creates more socioeconomic problems for the state. It’s really a no-brainer.
Under Republican dominance, Oklahoma has quickly become a shining example of failed conservative ideology. Despite some state leaders’ rosy rhetoric about the state’s economic development, Oklahoma faces chronic problems in many areas, precipitated by underfunding for education, health issues and corrections. Costly and unneeded tax breaks for oil and gas companies only make it worse.
The U.S. Geological Survey has determined that the large rise in the number of earthquakes in Oklahoma in recent years might be partly attributed to the wastewater disposal methods used in oil and gas drilling techniques.
In a statement released recently, the USGS noted there were one to three earthquakes of 3.0 magnitude or more from 1975 to 2008. Since that time, the state has averaged 40 earthquakes of 3.0 magnitudes or more on an annual basis, according to the USGS, which has labeled the increase a “swarm.”
This information has important implications for Oklahomans in terms of personal safety and building codes. Is it only a matter of time before a major earthquake hits Oklahoma and does major damage?
According to the USGS statement, “the analysis suggests that a contributing factor to the increase in earthquakes triggers may be from activities such as wastewater disposal--a phenomenon known as injection-induced seismicity.”
Injection wells for wastewater are part of the hydraulic fracturing or “fracking” drilling process. The wastewater from the fracking process and other drilling methods is injected into the ground, which could cause instability and stresses in rock layers. Studies in recent years have suggested a link between injection wells and earthquakes here and elsewhere in the world. Fracking has also been blamed for water contamination in some areas by environmental activists.
Should oil and gas companies be held accountable for the increase in seismic activity? Oil and gas companies have contributed much to the Oklahoma economy for decades, but could their drilling techniques lead to major destruction here? Will the end of the fossil fuel era be marked by damaging earthquakes?
These are not simply hyperbolic questions, and the mounting evidence suggests they need to be discussed.
The USGS noted that Oklahoma has always been prone to earthquakes, but “the increased hazard has important implications for residents and businesses in the area.” The USGS pointed to the 5.6 magnitude earthquake near Prague in 2011, and recent earthquakes just east of Oklahoma City that measured 4.2 and 4.4. There were several earthquakes in central Oklahoma on Saturday and at least one on Sunday. I think it’s fair to argue that the large increase in earthquakes is an alarming issue here in Oklahoma, and it’s probably not getting enough attention. Will it take a major earthquake to wake up people?
As I mentioned, there is now a growing number of studies that suggest injection wells and fracking can be tied to an increase in earthquakes. If the oil and gas industry here and elsewhere will not respond to this obvious dilemma with solutions, then the state and federal government should step in to protect people and their property.
Chesapeake Energy was back in the national news again recently.
ProPublica, an independent investigative media site based in New York, published a report a couple of weeks ago on how oil and gas companies are cutting royalty payments to landowners through questionable practices.
The report leads with the case of northern Pennsylvania farmer Don Feusner, who has wells on his land drilled by Chesapeake, the Oklahoma City energy company formerly led by Aubrey McClendon. According to the report, Chesapeake starting “withholding almost 90 percent of Feusner’s share of the income to cover unspecified ‘gathering’ expenses and it wasn’t explaining why.”
This is not uncommon, the report concludes, but it does raise contractual and royalty issues. Here are the overview paragraphs of the report:
. . . manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found.
An analysis of lease agreements, government documents and thousands of pages of court records shows that such underpayments are widespread. Thousands of landowners like Feusner are receiving far less than they expected based on the sales value of gas or oil produced on their property. In some cases, they are being paid virtually nothing at all.
The accelerated use of hydraulic fracturing, known as “fracking,” has created a mini-boom in gas wells in different parts of the country, such as Pennsylvania and North Dakota, but landowners are not necessarily reaping the benefits they expected from the bonanza, the report argues. Many people have also argued fracking has a detrimental impact on the environment.
Chesapeake declined to talk to ProPublica for the report. The company made major headlines in recent months when McClendon’s leadership of the company came under fire. Reuters produced a special report on how McClendon, then the company’s chief executive officer, merged his personal finances with company business. McClendon has since left the company.
I couldn’t find any significant local coverage of the ProPublica piece, which isn’t surprising. The initial piece was published Aug. 13. This excellent, investigative reporting directly involving a local company was probably either completely ignored or at least played down here. I was made aware of it when it was republished on philly.com. The corporate media here continues to coddle local energy companies while outside media outlets fill the void. It should be noted that The Oklahoman, the state’s largest newspaper, is now owned by a Colorado billionaire, who made his fortune in the oil industry.
The state’s private energy sector, which includes companies such as Chesapeake, SandRidge Energy, Devon Energy and Continental Resources, deserves more local media scrutiny of its business practices and its local and national environmental impact. While these companies are important to the local economy, they also need to act responsibly.
In his piece, ProPublica writer Abrahm Lustgarten noted:
ProPublica made several attempts to contact Chesapeake Energy for this article. The company declined, via email, to answer any questions regarding royalties, and then did not respond to detailed sets of questions submitted afterward. The leading industry trade group, the American Petroleum Institute, also declined to comment on landowners’ allegations of underpayments, saying that individual companies would need to respond to specific claims.
Why won’t Chesapeake and the American Petroleum Institute discuss the issue? That, in itself, raises even more questions.