Rationale and Implementation

Such policy alterations are based on the experiences observed during the development of the Barnett formation, as well as preliminary indications from initial activity in the Marcellus formation. As companies develop more wells with current technology, ever-greater volumes of water will be needed, and further road degradation will occur, exacerbated both by well development in primarily rural areas and the

temperate climate of the region. Moreover, it should be noted that these issues should not be presumed to represent all potential, or even likely, negative associative effects

stemming from shale gas development. Therefore, policies and funding options must be of sufficient size to allow for addressing such unforeseen or expected negative

externalities.

The question remains, how can a gas fund contribute specifically to some of these negative impacts in ways that a severance tax or usage fee won’t? There are a number of different types of natural resource funds, each with their own purpose and function. Alaska’s fund, for example, is controlled by the state legislature, and functions much like a pension, whereby every Alaskan receives a yearly

disbursement. Contrast that with the Azerbaijani fund, designed essentially as an earmark for the benefit of future generations. And of course, there are other funds – stability funds – like in Norway, wherein the purpose is to provide sufficient

revenue for a central budget in case the overall value of hydrocarbons changes dramatically, thereby negatively affecting royalties, upon which the national budget relies.

In Pennsylvania, as mentioned above, there exists no severance tax and hence, no statewide budgetary reliance on royalty income. Furthermore, while there is a tradition of viewing the mineral wealth beneath the feet of Pennsylvanians as a nominally communal resource for benefit of the commonweal, the truth is that the way in which modern capitalism manifests itself in the United States downplays such communitarian notions of collective wealth, and thus there remains little motivation to impose such paradigm upon the natural gas industry.

In addition, Pennsylvania benefits from being a component of a much larger, much more deeply and widely diversified economy whereby many of the more troubling economic concerns associated with extractive industries – namely the Dutch disease and resource curse, characterized by a generalized inflation – would seem to be less of a problem.

Yet, many undeniable complications do present themselves. As made clear by the research presented earlier in this work, those problems will manifest in areas least likely to possess the capability to address them in any meaningful, effective way. Thus, Pennsylvania will be forced to set a new precedent, whereby the state borrows liberally from the funds that work, and dispose of the aspects of these funds that would not only be inappropriate for Pennsylvania policy issues, but could potentially lead to larger problems down the road.

Hence, the establishment of the gas fund in Pennsylvania should focus on the mechanics of how the fund is to operate - specifically, how the fund is managed, how the disbursement of money from the fund will be carried out, and how its ability to satisfy particular social problems can be distinguished from a tax or fee.

While insulating the domestic economy in Pennsylvania from the flow of hard currency does not present itself as a necessarily notable problem, the

multitude of other attendant problems which would necessitate the creation of such a fund provides ample justification for establishing a fund that works, on the local level, as a stabilization fund.

Paradoxically, the Pennsylvania Gas Fund should have at once a very broad and yet a very narrow mandate. On the one hand, the fund should have the latitude to address problems that have not yet been identified but that may manifest

themselves as development of the shale reserves proceeds. On the other, the fund must be sufficiently constrained, by state legislative mandate, so that the function of the fund focuses only on localities negatively affected by the shale development, either directly or indirectly.

Ideally, the fund would require a separate bureaucracy that would focus primarily on tracking development of the shale gas reserves and the attendant effects that manifest as that development increases. The aim of such a separate bureaucracy would be to insulate the fund from arbitrary political power struggles and cronyism – problems that would fundamentally undermine the entire purpose of the fund. The best way to successfully endeavor to do something along these lines would be to elicit the help of various institutions of higher learning in the

Commonwealth, the interest of which is public service and the pursuit of knowledge for the benefit of society at large. Not only would leveraging universities reduce overhead, the fund would be able to synergistically partner with universities in such a way that the state can develop its own class of specialists.

Hence, with adequate funding, proper oversight, a premium placed upon both independent research and the public good – both for the function of the fund itself and for policy consistency moving into the future, the Pennsylvania Natural Gas Fund would prove to be an effective and efficient arbiter of the potential problems and solutions related to shale gas development throughout the state.