Natural Gas Set to Grow in Pennsylvania

By Mario F. Cattabiani
Inquirer Staff Writer
HARRISBURG - When it became clear that the state budget was in crisis mode, three industries with much at stake in Harrisburg opened their wallets.

Gambling interests, natural-gas drillers, and tobacco companies have since January spent more than $4.5 million combined on lobbying efforts, according to expense reports filed last week with the state.

Those industries were among the few winners in a budget ravaged by the recession.

Casinos are poised to introduce poker and other newly legalized table games. Natural-gas drillers and tobacco companies fought off new taxes.

Six-figure lobbying campaigns are not new in Pennsylvania's capital. And it's hard to know the extent to which such activity changes legislators' minds. Even so, critics say the dollar amounts speak for themselves.

Industries "wouldn't spend money like that if it didn't work," said Barry Kauffman, executive director of Common Cause of Pennsylvania, a watchdog group.

Lobbying expenditures are, in Kauffman's view, "a key indicator of how Harrisburg really works: Invest a lot of money, and you are going to have a lot more clout at the bargaining table."

Comparing recent expenditures with past lobbying efforts is difficult. Pennsylvania didn't enact its disclosure law until late 2006, long after most states. And unless they provide gifts or lodging, those who try to influence state decision makers must report little detail other than the totals spent.

Arthur Zaretsky, for one, isn't shy about describing the details: He hosted receptions and made his case to legislators over food and cigars - the latter being his business.

Zaretsky never thought he would need a lobbyist until it became clear to him this year that Gov. Rendell and Democratic legislators had set their sights on his livelihood. They wanted to help close the budget gap by taxing cigars.

Zaretsky, owner of Famous Smoke Shop, an Easton Internet and mail-order retailer of premium cigars, hired Eckert Seamans Cherin & Mellott L.L.C., a Pittsburgh law firm with a Harrisburg office.

"I needed to educate the politicians about exactly what it is we do and how many people we employ and that putting on a tax would not be a good idea," he said.

Eventually, Republican legislative leaders defeated the proposed cigar tax, along with one proposed for smokeless products such as chewing tobacco and snuff. Left standing was a new tax on little cigars - cigarillos.

In all, tobacco interests large and small spent nearly $1.5 million on lobbying from January through Sept. 30, records show.

Reynolds American Inc., whose subsidiary Conwood Co. is the nation's second-largest producer of smokeless tobacco products, devoted the most - $670,658.

Lobbying in the capital takes many forms - meetings with legislators, letter-writing, and "blast" e-mail campaigns orchestrated by lobbyists. There are studies and polls and white papers commissioned by lobbyists.

"There is nothing wrong with lobbying per se. It is just delivering information. It's valuable," said Rep. Greg Vitali (D., Delaware). "The problem comes when lobbyists try to do more than inform, try to ingratiate themselves to you. And that happens a lot in Harrisburg."

To natural-gas drillers, too, the writing was on the wall as early as February. That was when Rendell announced in his budget address that he was pushing for a new tax on the odorless, colorless gas found deep below Pennsylvania's soil.

Rendell said the tax would bring in about $100 million this year, thanks to what he called the "gold rush" of new drilling for natural gas in the vast underground formation known as the Marcellus Shale.

But in late August, the governor - to the surprise of some of his aides - said drilling executives had convinced him that imposing the tax this year would stunt the growth of the industry. Rendell said he would abandon his push until next year. The companies won another major victory in the prolonged budget battle, persuading lawmakers to open up thousands of additional acres of state forest land to drillers despite the concerns of environmentalists. The industry's argument: The state could bring in more revenue by leasing the land to drillers than by taxing the gas extracted.

As a whole, the natural-gas industry reported spending about $1.6 million on lobbying thus far this year.

Range Resources Appalachia L.L.C., a Texas company that has invested heavily in drilling in the Marcellus Shale, led the way, spending $605,817 this year - nearly triple the expenditure of the next-closest natural-gas company, Chesapeake Appalachia L.L.C. By comparison, Range Resources reported spending less than $200,000 on lobbying here last year.

"Natural gas has a big story to tell and a good story to tell," said Matthew M. Pitzarella, spokesman and registered lobbyist for Range Resources. "It is critically important that our elected leaders and regulators have a healthy understanding of modern natural-gas development and the potential for Pennsylvania."

As the economy sank, the odds of adding table games to slots parlors, once just a dream for the casino industry, improved greatly. Expanding gambling options created a "full-time employment opportunity" for the lobbying community, said Kauffman, of Common Cause.

The millions in revenue that roulette, poker, and blackjack could raise was too great a lure for lawmakers and Rendell to ignore, and the industry was ready to trumpet the pros.

The Sands Casino Resort Bethlehem, which opened in May, reported spending about $307,000 so far this year lobbying - more than any other gaming company in the state.

Such an amount came as no surprise in Harrisburg. Since the state approved slots parlors in 2004, the casino lobby has become an "influential force in the halls of government," said Rep. Paul Clymer (R., Bucks), the legislature's leading gambling foe.

The industry's pitch was simple: Table games meant new jobs and new revenue for a state in dire need of both.

"They have deep pockets and have made the right connections and, as a result, have been successful in getting their agenda passed," Clymer said. "One-and-a-half million dollars might seem like a lot of money, but when you compare it to what they will make on table games, well, it's a great investment."

The lobbyists' work isn't complete. Legislative leaders in the House and Senate have yet to come to terms on the details of the table-games legislation. Sticking points include how much the state would charge the casinos in taxes and licensing fees.

Contact staff writer Mario F. Cattabiani at 717-787-5990 or mcattabiani@phillynews.com.