Royal Dutch Shell: They Really Have a Friend in Pennsylvania

Royal Dutch Shell, which owns or leases about 900,000 acres in the Marcellus Shale, had a great idea.

It wanted to frack the Ukraine. But, there was opposition. So, Royal Dutch Shell decided to create a junket for some of the Ukrainians opposed to fracking to show them just how wonderful fracking is.

They were going to bring the Ukrainians to northeastern Pennsylvania, and give them an all-expenses-paid four day tour. The tour was to begin at the end of July. Other shale gas corporations have created press junkets, where they lay out a nice day or two of activities, complete with handouts, trinkets, meals, and lodging. Members of the establishment press often go on these junkets. Some take what they’re told, rework it, and put it into print or on the air.

Now, the people of the Ukraine anti-fracking movement aren’t idiots. They weren’t just going to take whatever they were shown and told. So, they contacted the state’s leading fractivists and anti-fracking organizations. They wanted to learn all the facts—not just what was spoon-fed to them. They were willing to talk to anti-fracking activists when there were no other scheduled activities.

But Royal Dutch Shell was monitoring FaceBook and the Internet, and saw that the Ukrainians were trying to talk to the grassroots movement in Pennsylvania to get all sides of the issue.

What a company with solid PR would do would be to just deal with it—and hope that its side could be presented, and the people would make reasonable decisions. But, Royal Dutch Shell, apparently, has some rather lame six-figure income PR people and administrators.

Royal Dutch Shell decided it didn’t want to deal with having any opposition to its PR tour. So, the company that has about $360 billion in assets–and made about a $27 billion profit last year, placing it No. 1 on the Fortune 500 list—cancelled the tour less than a week before it was to begin.

But the story doesn’t end with a cancelled press junket. Royal Dutch Shell is embedded into Pennsylvania politics.

The foreign-owned company was thinking about building an ethane cracker plant about 30 miles northwest of Pittsburgh. A cracker plant takes natural gas and breaks it up to create ethylene, primarily used in plastics. Royal Dutch Shell considered placing the plant beside the Ohio River in Pennsylvania, Ohio, or West Virginia. All three states were interested, but Pennsylvania held out the most lucrative corporate welfare check for the company, which had spent $14.5 million in lobbying during 2012, about 10 percent of all lobbying costs for all gas and oil corporations.

The Pennsylvania legislature handed over a 15 year exemption from local and state taxes, apparently without consulting local officials in Beaver County’s Potter and Center townships. Tom Corbett, who never met a gas driller he didn’t like, then approved a $1.65 billion tax credit over 25 years, tweeting, “A crackerplant would create up to 20,000 permanent jobs in Southwest PA.” The reality is considerably lower.

Shell stated it planned to hire only 400 to 600 persons; because of the location, many new employees would probably be Ohio and West Virginia residents. Even if all possible indirect jobs—including more low-wage clerks at local fast food restaurants—were added, the most would be about 6,000–7,000 employees.

Pennsylvania may have been able to attract the plant without giving up so much corporate welfare. A Shell news release stated the company “looked at various factors to select the preferred site, including good access to liquids rich natural gas resources, water, road and rail transportation infrastructure, power grids, economics, and sufficient acreage to accommodate facilities for a world scale petrochemical complex and potential future expansions.” Even then, Shell said it could be “several years” before construction would begin. At the proposed location, the Horsehead Corp., which signed an agreement with Shell to sell the land, has until April 30, 2014, before Shell could begin construction.

Corbett may have believed that extending corporate welfare to Royal Dutch Shell was just good business, and would spur job creation and the economy. But, there is another probability for his generosity, and it’s both personal and political.

Dory Hippauf’s “Connecting the Dots” series explains why Corbett may have been so generous with extending tax credits and subsidies, and it begins with billionaire Terrance (Terry) Pegula, who sold East Resources to Royal Dutch Shell in 2010 for $4.7 billion. East Resources, according to reporting in the Buffalo News, had “a less-than-stellar track record in the environmental dicey business of drilling for natural gas.” Terry and Kim Pegula donated $280,000, and Shell donated about $358,000, to Corbett’s political campaign for governor. As governor, Corbett appointed Pegula in March 2011 to the newly-formed Marcellus Shale Advisory Commission, which was loaded with pro-fracking energy company executives prior to being disbanded after fulfilling Corbett’s vision to produce a pro-industry report.

The story continues at Penn State, where the Marcellus Center for Outreach and Research (MCOR) announced that with funding provided by General Electric and ExxonMobil—which donated a combined $2 million to Penn State, the University of Texas, and the Colorado School of Mines—it would offer a “Shale Gas Regulators Training Program.” The Center had previously said it wasn’t taking funding from private industry. However, the Center’s objectivity may have already been influenced by two people—Tom Corbett, who sits on the university’s board of trustees, and Terry Pegula.

Hippauf made a few more connections. Pegula, a Penn State graduate, is full owner of the Buffalo Sabres of the National Hockey League. Penn State had Division II ice hockey teams that played in a 1,350 seat stadium. That would change. In September 2010, Penn State announced that Pegula and his wife, Kim, donated $88 million, the largest individual gift in Penn State’s history, to fund a world-class 6,000-seat ice hockey arena; the men’s and women’s ice hockey teams would now become Division I athletics; the arena will be completed this Fall. While understanding a person’s motives is difficult, it’s possible the Pegulas wanted to do something nice for Penn State. It’s also possible they saw Penn State as a feeder school to the NHL, especially the Sabres. There is also another possibility.

On the day Pegula gave the money to Penn State, he said, “[T]his contribution could be just the tip of the iceberg, the first of many such gifts, if the development of the Marcellus Shale is allowed to proceed.”

So, now we have connections between Penn State, a billionaire with connections to Penn State and Pennsylvania’s governor, and the world’s largest gas and oil multi-nation corporation, which has substantial holdings in Pennsylvania—and is afraid to allow Ukrainians to hear about the negative effects of shale gas drilling.

Walter Brasch’s latest book is Fracking Pennsylvania, an in-depth look at the effects of fracking upon health, the environment, and the economy; he also discusses the politics of fracking.

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