This week North Carolina Gov. Pat McCrory (R) signed into law a bill that opens up the state to fracking for natural gas. The Energy Modernization Act will allow drilling permits to be issued 61 days after the state Mining and Energy Commission approves final rules for the industry, which is expected to happen by next summer.
The new law breaks a pledge from legislators that they would review and approve the rules before the state's drilling moratorium could be lifted. Environmental advocates also criticize the law for failing to adequately address the risks associated with fracking and for weakening safeguards. Supporters claim it will boost North Carolina's economy.
"We have watched and waited as other states moved forward with energy exploration, and it is finally our turn," McCrory said in his announcement of the law's signing at North Carolina State University. "This legislation will spur economic development at all levels of our economy, not just the energy sector."
Standing by McCrory's side as he signed the bill were legislative leaders who played key roles in the push for drilling, including Rep. Mike Hager, a Rutherford County Republican and former Duke Energy engineer. Besides leading the legislative drive to allow fracking in North Carolina, Hager has also led an effort -- unsuccessful so far -- to kill the state's renewable energy standard, calling it a form of "corporate welfare" and an "entitlement program."
But it turns out that North Carolina's Republican leaders are now seeking taxpayer-financed "corporate welfare" for the oil and gas industry -- even though the five biggest drilling companies alone hauled in $93 billion in profits last year. As The News & Observer of Raleigh reports:
* The state Senate's proposed budget includes nearly $1.2 million to help the energy sector with drilling, analysis and marketing.
* McCrory's proposed budget includes $500,000 for drilling up to three test wells in Lee County, part of the state targeted for fracking.
* A separate $550,000 initiative was approved last year to help the energy industry assess fracking prospects.
The new fracking law also calls on the state to conduct taxpayer-financed studies on locating a liquid natural gas export terminal on the North Carolina coast, establishing a curriculum to train drilling industry workers at Central Carolina Community College, and developing infrastructure to facilitate oil and gas development such as pipelines, compressor stations, and gas processing systems. In addition, it prohibits local governments from imposing taxes on gas produced in their jurisdictions.
Joining the oil and gas subsidy game
North Carolina's plans to use taxpayer dollars to subsidize the oil and gas industry fall in line with historical efforts to spend public dollars to support politically powerful dirty-energy interests.
Oil Change International, a group that advocates for ending fossil fuel subsidies, estimates that the U.S. provides anywhere from $14 billion to $52 billion in annual support for oil, gas and coal companies. Over the past century, the federal government has pumped more than $470 billion into the oil and gas industry alone in the form of tax breaks.
Oil and gas companies also enjoy substantial subsidies at the state level, though they go largely untracked. A 2012 Earth Track report that looked at fossil fuel subsidies in five states including Louisiana, a center of both onshore fracking and offshore drilling, found that revenue losses from Louisiana's tax exemptions for the industry were $7 billion in fiscal year 2010. And severance tax losses, mostly from oil and gas, cost Louisiana $354 million. Severance taxes are imposed on the removal of nonrenewable resources.
Fracking has also received significant taxpayer support. Over the past three decades, the federal government has spent more than $100 million on research to develop the technique, which involves injecting large quantities of water along with sand and toxic chemicals underground to break shale rock formations and release natural gas.
This appears to be the direction in which North Carolina's current political leadership is headed: spending public dollars on a highly profitable industry that imposes significant social costs, including health-damaging water and air pollution. Fracking also releases significant amounts of methane, a potent greenhouse gas that contributes to climate disruption -- a serious concern for a coastal state like North Carolina that's vulnerable to sea-level rise and intensifying tropical storms.
"The state has already spent significant resources in pursuit of fracking, with no new jobs to show for it (beyond the state government staff hired to write the new rules)," NC Conservation Network Policy Director Grady McCallie wrote in his analysis of the new law. "If the legislature had spent a fraction of these resources on renewable energy and efficiency, we would already be seeing the payoff in jobs and income for North Carolinians."