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Monday, March 24, 2014

Study: PA taxpayers pay $5K-$10K per shale well for road rebuilding

Researchers from the RAND Corporation and Carnegie Mellon University have found that Pennsylvania taxpayers are paying $5,000-$10,000 in road reconstruction costs for every shale gas well drilled.

Estimating the Consumptive Use Costs of Shale Natural Gas Extraction on Pennsylvania Roadways was published last month in Journal of Infrastructure Systems.  A summary of the study can be found here, and is worth quoting at length:
...local roads are generally designed to support passenger vehicles, not heavy trucks, and [the study found] that "the useful life of a roadway is directly related to the frequency an weight of truck traffic using the roadway."
The study’s findings include:
Heavier vehicles cause exponentially greater roadway damage… “This means that 18,000-pound and 30,000-pound single-axle passes do about 900 times and 7,500 times more damage than a 3,000-pound single axle pass, respectively.”
The estimated road-reconstruction costs associated with a single horizontal well range from $13,000 to $23,000. However, Pennsylvania often negotiates with drilling companies to rebuild smaller roads that are visibly damaged, so the researchers’ conservative estimate of uncompensated roadway damage is $5,000 and $10,000 per well.
While the per-well figure of $5,000-$10,000 appears small, the increasingly large number of wells being drilled means that substantial costs fall on the state: “Because there were more than 1,700 horizontal wells drilled [in Pennsylvania] in 2011, the statewide range of consumptive road costs for that year was between $8.5 and $39 million,” costs paid by state transportation authorities, and thus taxpayers.
“Some external costs, such as air-quality related health problems, are borne by society at large,” the scholars conclude, “but roadway consumption costs accrue directly to the state and local departments of transportation (e.g., PennDOT).” They suggest several potential approaches that…Pennsylvania could take to reduce these costs, including an additional fee or tax on top of current per-well impact fees, limiting truck size and weight, or encouraging the use of pipelines rather than trucks…
A total of over 8,000 shale gas wells are drilled or under development in Pennsylvania, and the state may see seven more decades of drilling. Pennsylvania's current anemic - or perhaps more accurately, miniscule - impact fee is equivalent to the smallest effective tax rate on shale gas production in the USThe RAND/CMU study's three recommendations must be heeded to eliminate an inexcusable subsidy to the natgas industry.

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