Local governments will assess, implement fee
By Eric Boehm | PA Independent
HARRISBURG — Gov. Tom Corbett’s plan to impose fees on natural gas drillers is raising objections over how the revenue is distributed.
He wants the counties where the drilling is taking place to have the authority to impose and collect the impact fee with nearly all revenue going to these locations. The impact fee would cover environmental and infrastructure damage caused by the drilling industry.
But Democrats and some Republican lawmakers said they want the revenue distributed more widely than Corbett's plan, which he unveiled Monday in Pittsburgh after he received the final report from his Marcellus Shale Advisory Committee.
Top state Senators said the governor's plan would help move the process forward, with an eye toward passing an impact fee bill by the end of October.
“Now that we have an indication that the governor will sign an impact fee, Democrats and Republicans in the House and Senate have to get together and fashion a serious Marcellus policy for all of Pennsylvania,” said state Sen. John Yudichak, D-Luzerne, who has taken the lead on the Marcellus issue for Senate Democrats.
Senate President Joseph Scarnati, R-Jefferson, said all parties generally agree that an impact fee would fund statewide environmental programs and help local communities affected by drilling.
“I am confident that the final package will be reflective of our understanding of the need to balance the economic growth of this booming industry with the environmental health and well-being of the citizens of the commonwealth,” Scarnati said.
Scarnati said last week the impact fee was his No. 1 priority for the fall session. He had introduced a fee plan in the spring, but Corbett threatened to veto it if it passed the General Assembly at that time.
In Corbett’s plan, drillers would pay a $40,000 fee in the first year a well is operational, dropping to $30,000 in the second year, $20,000 in the third year and $10,000 annually for the fourth through 10th years. If a well remains operational after 10 years, no fee would be charged. The maximum amount the proposed fee would generate over the life of a well would be $160,000.
Companies could qualify for fee credits of up to 30 percent if the drillers invest in natural gas infrastructure, including natural gas fueling stations and natural gas public transit vehicles, the administration said.
“This natural resource will fuel our generating plants, heat our homes and power our state’s economic engine for years to come,” Corbett said in a statement. “We are going to do this safely and we are going to do it right, because energy equals jobs.”
Corbett said the fee would generate about $120 million in the first year, climbing to $200 million annually by the sixth year as more wells are drilled.
In Corbett’s plan, 75 percent of revenue would go to counties and municipalities that host natural gas drilling in the state’s northern and western regions. Counties and municipalities outside the drilling areas would not receive any revenue.
State Rep. Greg Vitali, D-Delaware, said the lack of statewide funding component left Corbett’s plan short of what is needed.
“We need more revenue that is fairly distributed to scale back cuts in basic education, higher education and health care,” Vitali said.
The Corbett plan also allows counties to assess and implement the impact fee. This requirement differs from legislative proposals that put the state's Public Utility Commission in charge of the process.
Yudichak said allowing every county to decide how to handle the fee would result in a “patchwork quilt” of policies.
Republicans from the southeast generally oppose the plan because fee revenue would not help their local areas. Settling that division will be critical if the plan is to move forward.
State Rep. Thomas Murt, R-Montgomery, said the revenue should be shared statewide. He compared the impact fee to the state sales tax. Five of the eight top sales tax producing counties are in the state’s southeast corner.
“That (sales tax) money is not kept local to the southeast,” Murt said. “It gets used all across the state.”
In the Corbett plan, the 25 percent of revenue going to the state will be mostly kept in the Marcellus region too, with 70 percent of the statewide total earmarked for transportation infrastructure projects in counties where drilling takes place.
The remaining state-level revenue will be divided between the Pennsylvania Emergency Management Agency, the state Fire Commissioner, the state Department of Health, the Pennsylvania Public Utility Commission for pipeline safety and the state Department of Environmental Protection for plugging and inspecting closed wells.
Corbett’s proposal also increases the required setbacks for wells from streams and lakes and penalties, enabling the state Department of Environmental Protection to take swift action against violators and increase well operators liability for contamination of waterways.
Jan Jarrett, executive director of PennFuture, an environmental group based in Harrisburg, said those issues were all critically important, but they should be addressed separate from the impact fee.
House Republican leadership seems to stand with the governor.
House Majority Whip Stan Saylor, R-York, said “the last thing” House Republicans want to do is get in the way of jobs created by the Marcellus shale industry. Corbett’s plan, he said, is good for the industry’s growth and for Pennsylvanians.
“I think we have to do something now in the General Assembly, since the governor has put out his plan,” Saylor said. “But it should be focused on benefiting the local governments where there is drilling going on."
Representatives of the gas industry generally support the governor’s proposal.
“We agree with a number of principles cited in the governor’s proposal, including focusing much of the fee in areas that have drilling activity and dedicated support for emergency responders and the state Fire Academy,” said Lou D’Amico, president of the Pennsylvania Independent Oil and Gas Association, which represents about 900 companies in the state.
D’Amico pointed out that drilling companies in Pennsylvania are subject to some of the highest state taxes in the nation.
According to the state Department of Revenue, the drilling industry paid more than $1.1 billion in state taxes last year and paid more than $200 million to repair local roads and bridges.
David Sanko, executive director of the Pennsylvania State Association of Township Supervisors, which represents local governments, said the proposal was consistent with what his organization supported.
“Impact fees are for impacted communities,” Sanko said.
He was a member of the governor’s Marcellus Shale Advisory Committee, assembled by the governor in the spring to study the state’s booming natural gas industry and make recommendations for economic development, environmental protections and regulatory changes.
