Scott Freshwater: Governor, don't take away our shovel
Despite what seems to be common perception, West Virginia’s independent oil and gas producers are not raking in millions every month, sending excess dollars to Wall Street banks.
In fact, with the current environment of low natural gas prices, we are doing all we can to bring a few dollars to the main streets of the West Virginia communities where we live.
While the shale gas boom has been a boon to bringing new clean-burning natural gas supplies online, the abundance of gas in the marketplace has brought the price of a cubic foot of gas to nearly historically low levels.
And not all gas producers, representing one of the oldest industries in West Virginia, are producing gas from the prolific Marcellus and Utica shale formations.
Years ago, before technology allowed those tight sand formations to be accessed, local producers created the Independent Oil and Gas Association of West Virginia.
IOGAWV is the voice of the state’s natural gas producers — people who live in West Virginia, who employ hard working West Virginians and have for generations, who contribute greatly to the economy and their local communities, who raise kids here and who vote here.
The current low price environment, coupled with ever increasing gas transportation and processing costs, regulatory compliance costs, operating costs, severance taxes and a flawed property tax formula, has caused many West Virginia producers to operate in the red for several years.
That’s not an opinion or hyperbole, that’s fact.
While us independent, local employers are trying to survive, Gov. Jim Justice has proposed a tiered severance tax on natural gas that consists entirely of increases, beginning with a floor that matches the current 5 percent rate.
The governor’s proposal provides no relief at a time when the industry could really use it. While Justice likes to say the Legislature is kicking the can down the road, his tiered severance tax proposal kicks us while we are down.
Natural gas development poses the best short-term fix to the economic morass our state is facing.
Instead of creating jobs and improving the economy, as was the platform of Justice’s campaign (Jobs, Jobs, Jobs), his proposal discourages growth and kills jobs and, quite possibly, an entire industry.
It will drive investment for mineral development to surrounding states with much more reasonable severance taxes and reduce the likelihood of our royalty owners seeing any income from new wells being drilled.
Independent producers are strong willed and resilient during tough times, and believe me, we’ve been digging and digging.
Producers, those who have survived the economic tough times anyway, have done their part by cutting to the bone, learning to do more with less and becoming more economically efficient.
The natural gas pipeline companies have done their part, seeking approvals of new projects and installing new infrastructure to get our natural gas to better markets.
And then, just when the forecasts are for improved gas prices and optimism about the future of the industry starts to return, the governor drops this proposal in our lap, eliminating any potential gains achieved from those efforts.
Proposing a tiered severance tax with nowhere to go but up in a time of historically low pricing shows how out of touch the governor is from the reality of the energy market.
West Virginia producers are in a deep hole that we are trying to dig ourselves out of, and the governor is trying to take away our shovel.
It’s time for our legislators to do their part. I strongly urge the House of Delegates and the Senate to reject the tiered severance tax proposal on natural gas.
Scott Freshwater is president of the Independent Oil and Gas Association of West Virginia.
This op-ed was authored by Scott Freshwater and published in the Charleston Gazette Mail. Click here to read it on the publication's website.