Pennsylvania Says Cuomo is Sabotaging its Energy Industry
Editor’s note: The following article was produced by City & State magazine and reposted with permission.
On Earth Day, environmentalists cheered as New York Gov. Andrew Cuomo’s Department of Environmental Conservation denied a crucial permit for the $750 million Constitution natural gas pipeline. The move by the DEC, which had already banned high-volume hydraulic fracturing in the state in 2014, killed the ambitious project, which was designed to bring the spoils of gas wells in Pennsylvania to lucrative markets in New York, New England and beyond. The pipeline’s death came, some speculate, because it had sought to cut a path between two states headed in opposite directions on energy policy.
A few weeks later and a state away, Pennsylvania Gov. Tom Wolf’s handpicked secretary of the state Department of Environmental Protection, John Quigley, resigned amid accusations that he’d gotten too friendly with environmentalists. The timing of his ouster meant that he wasn’t around in an official capacity in June, when his former boss gutted years’ worth of the department’s efforts to implement new drilling regulations for certain natural gas companies. “They’re a lot more restrictive,” Wolf griped in July when asked about Cuomo’s policies. “It’s so restrictive in New York that we can’t even pipe our gas across its borders to New England, which really needs a clean source of energy.”
This unlikely rift between New York and Pennsylvania had been growing for years. The two states are in many ways very similar, not least in that they both have Democratic governors who describe themselves as environmentalists. But the states are handling the issue of what to do with the bounty of natural gas buried deep beneath their soil—and how that resource impacts current and future energy policy—in radically different ways.
There are clear structural issues behind the division: Wolf is bound to powerful rural legislators from the Marcellus Shale region, and both Democrats and Republicans are desperate to fuel Pennsylvania’s flagging economy with gas industry jobs. At the same time, his New York counterpart has sailed along on a tide of opposition to gas drillers, centered in the politically influential New York City metro area. And Cuomo’s agencies have acted independently—on the Constitution pipeline decision, the ban on hydraulic fracturing, and subsidies to nuclear power plants as well as solar and other renewable industry players—without the need for legislative approval.
But some grumble about deeper, more cynical motivations and promises that will never be fulfilled. Cuomo’s environmental gains are coming at the expense of other states, they say, underwritten by cheap gas from Pennsylvania, which New York City is consuming at record levels, all while tying much of his energy policy’s future to the costly subsidization of the state’s ailing nuclear sector. Some observers have speculated that he may be more interested in the presidency than realizing his own promises of a carbon-free New York, though he again denied any higher ambitions when asked recently at the Democratic National Convention.
Meanwhile, after a bruising budget battle last year, Wolf may be more concerned with securing his own re-election through compromise than fulfilling a rose-tinted vision of a state that is both environmentally responsible and accommodating to the gas industry.
“For the first 15 months in office, Wolf fought like a tiger to transform Pennsylvania, and, frankly, he didn’t get anywhere,” said John Hanger, who served as secretary of the Pennsylvania Department of Environmental Protection from 2008 to 2011. “For the last six months, he’s chosen to take whatever piece of the loaf he (can) get.”
But it’s a promise that can seem far fetched, based on gas industry domination of Harrisburg, Pennsylvania’s capital, combined with a downward economic trajectory—with supportive politicians forever chasing the promise of that unshackled industry creating a gusher of new jobs.
As Wolf and Cuomo go farther down their chosen paths, the division has created public friction between environmentalists, the gas industry in both states – and even between the two governors.
Cuomo’s signature move in the war between a booming Northeastern hydrofracking industry and environmental groups was a 2014 announcement that, after six years of study, New York would officially ban hydrofracking. Since then, he has continued to shift away from natural gas.
In August, Cuomo’s Public Service Commission voted to adopt the Clean Energy Standard, formalizing his previously stated goals by requiring that energy providers in the state comply with the objective of deriving 50 percent of all energy from renewables by 2030. The new standard also set aside more than $1 billion in subsidies to keep existing nuclear power plants operational.
Even Cuomo’s economic development policies have frustrated the gas industry, including huge investments in nuclear energy and aggressive efforts to develop renewable energy and cut greenhouse gas emissions. At a cost of more than three-quarters of a billion dollars, New York is building North America’s largest solar panel factory in Buffalo, set to be run by SolarCity. The lead anchor tenant at a business hub in the rural Western New York town of Alabama, 1366 Technologies, is a manufacturer of solar equipment parts. And the state is putting $250 million toward a photonics center in Rochester, which will house a solar research and development facility.
“Governor Cuomo has led the way in combating climate change—one of the single greatest challenges of our time,” said Abbey Fashouer, a Cuomo spokeswoman. “The governor is taking real, enforceable actions to preserve our planet through the Clean Energy Standard, including a first-in-the-nation 50 percent renewable energy mandate which will reduce greenhouse gas emissions and grow the clean energy economy. New York will continue to lead the way forward with policies that create jobs, develop new industries and protect our environment for future generations.”
Many groups, including unions and environmentalists, have cheered the administration’s push toward developing clean energy jobs.
“Governor Cuomo has shown his commitment to climate leadership by moving New York, and the nation, towards a renewable energy future, while at the same time creating thousands of jobs across the state, protecting ratepayers from volatile fossil fuel prices, and improving New Yorkers’ public health and environment,” Lisa Dix, New York senior representative for the Sierra Club, said in a statement after the adoption of the Clean Energy Standard.
But critics say these economic and environmental policy moves amount to heavily subsidized job creation schemes that hurt taxpayers while benefitting industry leaders.
Ken Girardin, a communications and marketing manager for the Empire Center for Public Policy, a conservative think tank, argued that Cuomo’s decisions are designed to force people into buying “less reliable, more expensive solar energy. This entire Clean Energy Standard is best viewed as a jobs program, funded on the backs of homeowners and businesses paying electrical bills.”
The Cuomo administration did not directly answer City & State’s questions about Pennsylvania’s energy policies, but in a press release issued on the day of the adoption of the state’s Clean Energy Standard, the governor indicated that he hoped the policy would be a catalyst driving other states to move away from natural gas and other fossil fuels.
“Make no mistake: This is a very real threat that continues to grow by the day,” Cuomo said of climate change, “and I urge all other states to join us in this fight for our very future.”
But if the plan was to lure states like Pennsylvania over to the green side, it hasn’t worked. Wolf has welcomed the continued drilling in his state, which issued some 2,500 drilling permits last year alone, and has supported a parallel strategy of investing big in urban natural gas processing hubs and other projects. He scoffed when asked if New York’s environmental policies should be regarded as a model.
“New York’s policy is because they are concerned about how advanced the (drilling) techniques are in fracking to assure themselves that (they) have a good clean environment,” Wolf said. “But I don’t know how you can assure yourself of that without actually doing it and regulating it and overseeing it and making sure you’re doing things right. So that’s the big distinction as I see it. Their policy is to not do it at all. Mine is to do it, and do it right.”
And make no mistake, Pennsylvania is doing it. It may not be as permissive as other gas-rich states, like West Virginia or South Dakota, but it’s the Wild West compared with New York. Wolf sealed a crucial budget deal this year in part by agreeing to scrap a big portion of a five-year deal to tighten drilling regulations after several disastrous gas leaks. The new state rules do apply to fracking enterprises, but politically influential conventional gas drillers, responsible for a disproportionate number of those leaks, were wholly exempted.
Wolf also inaugurated the largest tax credit in state history in July: $1.3 billion to underwrite a gas processing hub, known as a cracker plant, near Pittsburgh. And the gas industry wants him to go further. “We have abundant cheap energy here,” said Andrew Levine, chairman of environmental and energy practices at Philadelphia law firm Stradley Ronon. “But at the outset, it has to be recognized that Pennsylvania starts at a disadvantage. It has the second-highest corporate tax rate in America.”
Levine says that the state needs to subsidize gas-consuming industries in order to stimulate an industry still reeling from cratering petroleum prices that have made natural gas products less competitive. “You have demonstrable pre-existing demand,” he said. “We have to start that engine with a well-reasoned manufacturing incentive program. European companies and Asian companies are used to some level of government involvement. … It’s not material to the funding of the project; it’s symbolic. We lost a billion-dollar project to Ohio over a state contribution of $30 million. It’s a question of feeling welcome.”
Also on the Pennsylvania gas industry’s wish list: rolling back regulations in New York. Gas industry players like Levine suggested that the decision to deny the permit for Constitution might be part of a larger scheme to starve gas suppliers and reward the nuclear and renewable energy industries.
“It’s New York acting in a predatory fashion, trying to cut off Pennsylvania’s revenue stream,” Levine told City & State. “The governor of New York has a decidedly anti-gas stance. And he is doing anything he can to destroy Pennsylvania’s ability to transport gas through his state.”
But Empire State environmental groups couldn’t be happier about some of the recent moves in New York. Cuomo has set aggressive state energy standards—recognized by many as one of if not the most progressive in the nation—requiring that greenhouse gas emissions be cut by 40 percent from 1990 levels by 2030, and by 80 percent by 2050. Approving a project like the Constitution pipeline would have been a significant setback in reaching those goals.
“If you don’t let them build any new pipelines, then you have to meet the increased need through renewables,” said Anne Marie Garti, an attorney and founding member of Stop the Pipeline, an environmental group, though she said she believes the decision to block the Constitution pipeline was unrelated to Cuomo’s broader energy policies.
Jessica Azulay, a program director with the New York nonprofit Alliance for a Green Economy, agreed, saying the state can influence the way that infrastructure is built out and should be trying to push toward fewer emissions and systems that can deliver renewable energy sources.
“The state has to be really careful where it’s investing money,” Azulay said. “In terms of investments into infrastructure and energy generation facilities, continuing to invest in natural gas, which does contribute very significantly to greenhouse gas emissions, is going to hurt the state in terms of moving toward those goals. Their investments, at this point, should all be going into renewable energy build-out and not natural gas build-out.”
Pennsylvania’s environmentalists are considerably less cheery. They do not see Pennsylvania under Wolf’s leadership as laying out a grand energy strategy, but, instead, as carving out piecemeal victories for a struggling—but still influential—gas industry.
Wolf’s inauguration in 2015 had brought the promise of change—for the environmental policy and a host of other issues—after four years under Republican Gov. Tom Corbett. But in May, Quigley, the head of Pennsylvania’s Department of Environmental Protection, fell on his sword.
He had stood out from other DEP officeholders in that he was actually an environmentalist, having previously worked for the state Department of Conservation and Natural Resources. His predecessor, Mike Krancer, was a former energy company lawyer and a climate change skeptic.
But just 11 months after he took the job, Quigley tendered his resignation, presumably under heavy pressure from Wolf. The governor’s office gave no official reason for the secretary’s sudden departure, but few doubted it was unrelated to a profanity-laced email Quigley had sent just a few days earlier to several environmental activists protesting the move to gut new drilling regulations.
“I’ve slept on this but can no longer hold back,” Quigley wrote in the email. “Where the fuck were you people yesterday? The House and Senate hold Russian show trials on vital environmental issues and there’s no pushback at all from the environmental community?”
Today a fellow at the University of Pennsylvania’s Kleinman Center for Energy, Quigley doesn’t like talking about the debacle surrounding his resignation and wouldn’t criticize his former boss. But he wasn’t afraid to characterize the bipartisan influence the gas industry has on Harrisburg.
“This state has always been the captive of extractive industries,” Quigley said. “It was coal, oil, timber industries and, now, gas. The history has always been that we privatize the profit and socialize the costs. These industries have always had tremendous sway in Harrisburg—and they continue to have tremendous sway in Harrisburg.”
This may be the decisive difference between the two states on the issue.
Hanger, another former DEP secretary who went on to work for a law firm with ties to the gas industry, doesn’t fault Wolf for his political stance. Hanger said he admired that the governor cut through the hyperbole that often dominates both the pro- and anti-gas sides of the debate, which he said were riddled with misinformation or self-righteousness.
“It’s so polarized and politicized,” he said. “The industry denies it causes any problems. Anti-frackers deny it has any benefit. And the media plays up those roles. Wolf is right in the middle of the road, where all the dead armadillos are. He gets hit by both anti-frackers and industry.”
But Hanger concurred with Quigley’s assessment of the state Legislature as utterly in thrall to the gas industry, although he said it was not solely because of the industry’s considerable lobbying efforts.
He painted a picture of Wolf as a realist trapped by the geography of a polarized state.
“This is the huge difference between Pennsylvania and New York. The entire General Assembly in Harrisburg is in the hands of right-wing Republicans with historically overwhelming numbers,” Hanger explained. “In New York, the political center of gravity is New York City or maybe Long Island and Westchester. That area is dominant in New York politics and it’s predominantly anti-drilling. In PA, Philly and its suburbs are anti-drilling and important, but they’re not dominant. It’s the difference of where the population centers are.”
People in urban centers everywhere often mistakenly assume that because of high-profile protests, sometimes led by New York celebrities like Yoko Ono and Lady Gaga, fracking is unpopular everywhere. But in much of Pennsylvania, particularly the more rural and economically depressed sections of the state, that’s simply not the case. Quigley pointed to the jubilation surrounding the announcement of the tax-incentivized gas processing plant near Pittsburgh as evidence that even Pennsylvania’s cities weren’t wholly on board with anti-gas messages.
But he also said that full bans on fracking, like Cuomo’s, deprived rural areas of a rare economic opportunity. The difference between Wolf and Cuomo is that the New York governor could afford to ignore the depressed rural sections of New York state because of the dominance of urban centers. While jobs numbers are highly controversial for political reasons, the best estimate today pegs the size of Pennsylvania’s gas sector employment at around 90,000 – a not-insignificant number for smaller counties with few other prospects.
“Those who also say the gas industry created no jobs or very few jobs sound like New York elitists. Don’t tell a high school graduate in Lycoming County that’s making $80,000 a year on a gas well that that job isn’t important,” Hanger said. “The hypocrisy in New York is that they oppose drilling, yet consume a lot of gas.”
Indeed, reports show that New York had the largest number of homes added using natural gas as a heating source in the nation between 2005 and 2014, while air quality has improved around New York City as coal and oil plants have closed.
Cuomo, ever the shrewd politician with a lifetime of experience in the business, is likely not operating solely on moral grounds in his progressive energy posture. The governor surely saw the way the political winds were blowing when he decided to aggressively pursue these standards, several sources speaking on background told City & State.
Tom West, an attorney who represents gas interests in New York, said that while he and many of his clients disagree with the governor on the role that natural gas should play in building out renewable energy infrastructure, no one is against adding renewables.
Cuomo surely understands that dynamic, West said. “I think he’s trying to stake out his future as the governor who pushed the envelope on our energy policy,” he said. “I think he wants New York to be a model for the rest of the country, the rest of the world.”
Wolf, a first-time politician, was headed toward being a lame-duck, one-term governor after a disastrous nine-month budget impasse last year that revolved in part around his efforts to introduce a gas extraction tax. The consensus among those who followed this year’s budget process—which, notably, was only days late—is that Wolf likely had to abandon his position on the tax and on conventional drilling regulations (among other concessions) in exchange for support from powerful upstate Republican legislative leaders.
As Hanger puts it, Republican Senate President Joe Scarnati “is in a district that’s one of the most rural, natural resource-dependent in the country. He could not be elected to that seat if he did not support the gas industry.”
At least from a political point of view, this was probably a smart move—maybe one of Wolf’s only moves, Hanger said. In a state like Pennsylvania, most residents aren’t voting people out of office for being pro-gas—but they might vote out a governor for failing to pass the budget in a timely fashion two years in a row.
“(Environmental policy) virtually never overcomes someone’s lifelong partisan commitments,” said Hanger. “It certainly doesn’t move enough voters to turn a district”
Pennsylvania and New York do have one thing in common: their state executives have gone to great lengths to throw money behind what they view as a job-creating “bridge fuel” toward cleaner, greener energy sources.
Cuomo has pledged at least $1 billion—and some estimate that number could approach $8 billion by the end of the 12 years of planned state assistance—to prop up existing nuclear plants in the state as part of the Clean Energy Standard, a plan that his administration argues will ensure the state meets its greenhouse gas emission goals.
In his first press event related to New York’s efforts to keep nuclear facilities open, held this month, Cuomo appeared at the FitzPatrick Nuclear Power Plant on the shores of Lake Ontario with the heads of two energy giants—Exelon, which is buying the plant, and Entergy, which is selling it—to announce a deal to keep the plant open, saving the jobs of 600 employees. While there is no official estimate, the state expects that the move to renewable infrastructure and the subsidies to nuclear plants and solar industry manufacturers will create thousands of jobs in the coming years.
Coincidentally, the billion-dollar Pennsylvania gas cracker plant is expected to create 600 jobs, which Wolf touted on a recent trip to the region where it will be located. The state’s DEP promotes a Clean Power Plan plan that paints an almost utopian mixture of “clean” coal, natural gas and renewables—cutting carbon emissions by a third in 2030 while also growing extractive industries.
Both governors frequently bring up jobs when justifying the expenses incurred as part of their respective energy policies. Both as an investment and a job creator, Pennsylvania politicians, including Wolf, argue in favor of natural gas production, given its abundance and relatively low emissions compared with other fossil fuel sources.
It just has to be done right, Wolf says.
“I’m a very strong environmentalist, but I believe with the right regulations, the right oversight and right enforcement that we can do (gas drilling),” Wolf told City & State last month. “Most people, I think, want to do it, but they want to do it right. And that’s where I come down.”
In each case, both the industry advocates and the politicos argue that their respective solutions are cheaper and will create more jobs. But on the economic side, in Pennsylvania, the oil commodities crash is still ravaging the state’s gas industry and most of the commonwealth’s big drillers have laid off staff. Cabot Oil & Gas cut its capital budget by nearly 60 percent this year, while Atlas Resource Partners, which operates around 218 wells in Pennsylvania, filed for bankruptcy last month. A ballyhooed vision of transforming downstate refineries into an “energy hub” in Philadelphia seems to be faltering, with investors getting antsier as the era of cheap oil drags on.
“The predatory, monopolistic practices of the Middle East have deliberately caused an oil glut—and now, prices are recovering,” said Levine, the gas industry lawyer. “We’re dealing with the inception of this new market. It shouldn’t surprise us that there’s defibrillation going on. We’ll look back at this now as the start-up phase.”
It could be true, but it’s a pretty long start-up phase. And environmentalists, suffice to say,
hate Wolf’s plan. They don’t believe in “clean coal,” and there’s increasing evidence that fracking contributes far more to global warming than scientists once realized, primarily due to a growing number of previously undetected methane leaks. But state lawmakers, fearful of damaging a struggling industry, are already moving to scrap tighter state methane regulations that Wolf introduced in January.
While Wolf and Cuomo may be taking very different paths, both governors are making some pretty bold promises—economic, environmental, or both – through energy policy. Now they just have to keep them.
Azulay, the environmentalist with Alliance for a Green Economy, stressed that New York’s plan is not perfect—her group has been highly critical of the decision to invest so much in nuclear instead of using that money to more rapidly move toward renewables—but said that decisions like the Constitution denial and the institution of the Clean Energy Standard signal that the state is on a better path.
“It definitely contributes to the sense that, okay, we’re moving in the right direction now,” Azulay said. “We’re going to get renewable energy and that’s where we’re going to be putting our investments.”