Pa. Gas-drilling Bill Would Yield Estimated $190M

Associated Press

Pennsylvania’s booming natural gas industry would pay an estimated $190 million in fees in the first year, money spread across drilling communities and to state infrastructure and environmental programs, under legislation speeding toward votes in the state Legislature Monday.

The 15-year fee would be paid by all Marcellus Shale wells, and the total amount would rise in ensuing years as more wells are drilled, said key people involved in the negotiations. In addition, the bill would set aside a small share of the fee revenue to potentially assist the development of a massive petrochemical refinery in southwestern Pennsylvania or the reuse of three Philadelphia-area oil refineries that are shutting down.

The proposal is a result of weeks of talks between leaders of the Republican-controlled state Legislature and Gov. Tom Corbett, a fellow Republican. It has not been amended into a formal bill yet, but Senate President Pro Tempore Joe Scarnati, R-Jefferson, said it could get a Senate vote as early as Monday night.

House Republican officials said the bill could get a vote as early as Tuesday in that chamber.

Pennsylvania is the only major gas-producing state that doesn’t tax natural gas production, and Democrats have not been part of the negotiations after trying unsuccessfully for three years to win enough Republican votes to impose a severance tax on the industry.

Because Corbett opposes a tax on the industry, Republicans legislative leaders have instead pursued an “impact fee” that he views as being fundamentally different than a tax.

The impact fee would rise and fall with the price of natural gas and inflation and would be roughly equivalent to a 3 percent tax rate, legislative negotiators said.

But the fee, no matter the price of gas, would be well below the average lifetime per-well tax paid in other natural gas states, including $993,700 in West Virginia, $878,500 in Texas and $555,700 in Arkansas, according to the Harrisburg-based Pennsylvania Budget and Policy Center, a liberal think tank.

Counties that host the drilling would have the option of whether to impose the fee – a key element sought by Corbett and disliked by senators – but a critical mass of municipalities would have 60 days to override a county’s refusal. Counties and municipalities that refuse the fee would not get a share of the money.

Both the House and Senate passed bills on the topic late last year, but some details were substantially different, such as the size of the fee and the distribution of the money.

The bills also sparked criticism from some lawmakers that it gutted the ability of municipalities to limit drilling activity. The compromise proposal would address that by allowing municipalities to apply residential zoning standards on things like lighting, noise and structures to drilling operations, even though municipalities would have to permit drilling in residential zones and obey state spacing requirements.

Securing strict limits on municipal regulations has been a top priority of the natural gas industry as way to prevent municipal officials from imposing zoning ordinances that effectively prevent drilling there. The industry and Corbett had supported a concept called complete pre-emption, which opponents said would have completely erased any ability of municipal governments to enforce any ordinance that affected the drilling industry, but

The bill also would increase the required distance between drilling and public water sources such as reservoirs, but not to the extent sought by Democrats and environmental groups, and it would require the state to develop regulations for transporting drilling wastewater and enforce qualifications of treatment plant operators.

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