Indiana U Research: Fracking Support Grows When Fees Stay Local

Indiana UniversityNew research just published by Indiana University confirms what those with common sense already knew: If at least some of the fees paid by drillers go into the local township’s coffers instead of the county or state–people in that community are more accepting and favorable to drilling. IU questioned 453 PA residents in June 2014 (takes a long time to publish research) asking a variety of questions. The research shows that the public has more trust that revenues will be spent better by their local municipal government than by the county or state. Don’t you just love it when common sense breaks out? Of course PA’s far-left/liberal governor, Tom Wolf, is tone deaf when it comes to taxing the Marcellus industry. He wants to grab all the money he can and give it to teachers unions. PA has an impact fee which keeps 60% of fees raised local–a plan that works. Wolf wants to add a severance tax on top of the impact fee, which would create the nation’s highest severance tax rate (see IFO: PA Gov. Wolf Proposes Highest Severance Tax in Nation). Here’s a summary of the IU research, a wake-up call to politicians at all levels…

As voters in several states consider controlling oil and gas development in their communities, new Indiana University research offers valuable insight for developers as well as local and state officials.

The IU researchers determined that oil and gas development using fracking is greeted with more local support when the fees paid by developers go to municipal governments rather than into county or state general funds.

“There are two reasons for this,” said researcher Naveed Paydar of IU’s School of Public and Environmental Affairs. “The public prefers to give more responsibility to local units of government because they are confident they’re the people who can best handle any problems resulting from development. And the public also has greater trust that the revenues will be spent by their municipal government in ways that benefit the local economy.”

The conclusions are based on an in-depth public opinion survey of residents in Pennsylvania counties where there is oil and gas development. The research, the first to assess the association between public revenues and local support, is described in “Fee disbursements and the local acceptance of unconventional gas development: Insights From Pennsylvania,” published by the journal Energy Research & Social Science.

Paydar, a student in IU’s joint Ph.D. program in public affairs and political science, co-authored the article along with SPEA faculty members Ashley Clark, John A. Rupp and John D. Graham.

The practice of hydraulic fracturing, or fracking, to stimulate oil and gas from unconventional reservoirs abounds in Pennsylvania, West Virginia, Ohio, Texas and several other states. Wells are drilled and then water, sand and chemical additives are injected into the hole, creating cracks in the reservoir that release the oil and gas.

Opponents of fracking say the process causes various kinds of damages. To compensate for the costs associated with regulating the industry and to compensate local communities for damages, developers in Pennsylvania have paid more than $400 million in “impact fees” that go to county and municipal governments. Differences in public opinion about those fees are crucial given the controversy surrounding fracking.

In Pennsylvania, as in all states, the permitting and regulation of oil and gas activity is centralized at the state level. In numerous areas across the nation, local groups are forming to gain control and, in some cases, ban oil and gas development in their communities. As these “home rule” initiatives take place, opinions about how the financial benefits of development are managed are a key component of the discussion.

“As these disputes play out, government leaders should remember the public is more likely to accept unconventional gas development if the public revenue stays local,” Paydar said.

Propositions to establish local control over oil and gas development are on ballots in several communities in California, Ohio and Texas this fall. Votes on similar initiatives have been close, and the IU researchers say the routing of the revenue could shift public opinion enough to swing the outcome of a referendum.

About the research: The IU team questioned 453 Pennsylvania residents through an online survey conducted in June 2014, using the GfK Group’s KnowledgePanel. The study analyzed how local support for a hypothetical fracking project varies according to differences in the way that public revenue is disbursed to county and municipal governments. Previous research at SPEA found growing public apprehension about fracking that could be best addressed through establishing a culture of transparency by the industry and its regulators.*

*Indiana University (May 17, 2016) – Indiana University research: Support for fracking grows when fees stay local

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