Daily Local News (West Chester, PA)
Fracking lies in fate of financial markets
The oil and gas industries are under pressure from the rise of renewables and technology.
Natural gas and the fracking used to produce it are important to Pennsylvania. But fracking’s future does not lie with whether Donald Trump or Joe Biden is the next president. As with coal, which Trump farcically promised to save while campaigning in 2016, fracking and natural gas are at the fate of the markets.
There is little doubt, as Biden said recently, that gas is a transitional fuel. It is far cheaper than coal and generates only about half of as much air pollution, so it has supplanted coal as the primary fuel for power generation. U. S. mines produced 743 million tons of coal in 2016, when Trump vowed to revive the industry. This year, the industry will produce just over 500 million tons.
At the same time, oil and gas are under market pressure from the rise of renewables and technology. NFL fans this year might have noticed ads for a rebranded GM Hummer, which once was a gas- guzzling SUV; now it is a fully electric pickup truck. Every auto producer on the planet has invested heavily in electric vehicles, which already are taking over market segments in Asia.
Meanwhile, the International Energy Agency issued a report Thursday that solar power is now the cheapest form of energy to develop, due to technological advances and economic developments.
The IEA projects 43% more solar output by 2040 worldwide than it expected in only 2018, because solar power is 20% to 50% less expensive than originally projected, depending on types of systems and locations.
The question for gas, oil and fracking is “when” rather than “if.” Fracking will survive Biden if he is elected, but ultimately it will not survive market forces favoring renewables.
— The Citizens’ Voice
But is there a buyer?
A recent study by the Reason Foundation suggests that Pennsylvania should consider leasing the operations of the turnpike to a private fi rm in exchange for a large upfront payment.
It’s not the fi rst time such an idea has been fl oated, but the bigger question is whether there’s a private operator out there that would be interested in such a deal, especially given the current fi nancial condition of the nation’s oldest toll road.
The Los Angeles- based libertarian foundation’s report makes the case that Pennsylvania and eight other states should explore privatization options now because even though traffic—and toll revenue—is reduced on highways because of the coronavirus pandemic, the long- term nature of the leases provides opportunity for profit in the future.
If the concept sounds familiar, it’s because then- Gov. Ed Rendell floated a leasing idea back in 2008, one that had a consortium offering $12.8 billion for what would have been the largest such lease in the country. That proposal stalled in the Legislature, and the group eventually withdrew its off er.
The dramatic drop in the potential profit from a leasing arrangement is due to the problem that has plagued the turnpike for years—debt. The debt total is nearly $ 14 billion today, much of it because of the Legislature’s requirement that the turnpike make an annual $ 450 million payment to the Pennsylvania Department of Transportation for transit-alternative funding. Any potential privatization would require the firm to pay off the debt.
So, would a private firm be interested in leasing the turnpike operations? It’s hard to say. Although more popular in Europe and Australia, there are only five similar leasing arrangements in the U.S ., the largest being the Indiana Toll Road, which was leased in 2006 for $ 3.8 billion. The operator went through bankruptcy in 2014.
And a leasing arrangement of the Pennsylvania Turnpike would raise the question of what happens to the system’s nearly 1,400 employees.
The financially strapped turnpike is projected to lose more than $100 million because of reduced traffic— and lost toll revenue — during the coronavirus pandemic. Compounding its problems is driver frustration with the ever- increasing tolls, which will rise by 6% this year, the 13th consecutive annual increase. Those ever- increasing rates are causing drivers to find alternate routes.
Lawmakers must give every consideration to proposals for ways to improve the turnpike’s financial condition, but they shouldn’t get their hopes up about a potential private lease arrangement. The field of interested parties will likely be very small, and the payout is questionable.