'There are many non-Marcellus area legislators, in particular, who think of this as a revenue source, period'

 

By Eric Boehm | PA Independent

 

HARRISBURG — As chairman of the House Energy and Environmental Committee, state Rep. Scott Hutchinson, R-Venango, is one of the key players in a House GOP plan to impose a fee or tax on Marcellus shale drilling in the state.

Two plans have emerged as the General Assembly for the third consecutive year wrestles with the concept of a natural gas impact fee. 

 

Gov. Tom Corbett proposed a county-level assessment to address local impacts in areas where drilling is taking place. 

 

Senate President Joseph Scarnati, R-Jefferson, is pushing a plan to collect revenue at the state level and distribute it primarily to local governments, particularly in those communities hosting drilling.

 

The state House remains the final piece of the Marcellus shale puzzle, so PA Independent sat down with Hutchinson this week to discuss the natural gas industry, its impact on the environment and the approach Pennsylvania should take on the tax and fee issue.

 

The House Republican caucus seems to be divided on a number of issues, and perhaps that is most evident when you look at the Marcellus shale impact fee issue. Give us the inside view, what are the dynamics right now?

 

There are still major divisions on which direction to go with taxation of shale. There are many who believe there should be no taxation; there are a large number who believe in the governor’s plan — which is a local option, locally implemented plan.  And then there are others who, quite frankly, they see the Marcellus taxation as a way to get money for other things, which truly moves it far away from the notion of an impact fee.

 

I think it’s very hard under any scenario to give specific impacts, but there are many non-Marcellus area legislators, in particular, who think of this as a revenue source, period.

 

So there is a lot of division and that makes it difficult to do anything.

 

Philosophically, what is the right way for the government to approach an industry that is coming into the state and removing natural resources?

 

Let’s use an analogy. If a large manufacturing firm said we want to set up an operation in Pennsylvania to hire a couple thousand people — and that would be very large — what would happen is, state government would give them tax abatements. Essentially, that’s saying you don’t have to pay all your taxes. We would put infrastructure in place to help bring you here, maybe help you build your building, maybe low-interest loans. We would be giving them things to create jobs in Pennsylvania.

 

Now we have an industry that is not asking for handouts, and is creating far more than a couple thousand jobs, and for some reason people think they should have a double taxation. I don’t know if that’s the right way to go. They are subject to taxes like other businesses, and they pay those taxes.

 

We’re going to be in a lot of trouble, if we start singling out industries for double taxation.

 

But what about the impacts that have been identified by the governor’s Marcellus Shale Commission and other groups? How should the state address those?

 

The major impacts are things that are already covered. Last year, there were substantial increases in the permitting fees for drillers, and that substantial increase has allowed DEP (the state Department of Environmental Protection) to hire more regulators. And that’s a good thing.

 

The other impact would be things like roads. These companies are paying both to replace roads because of bonding which is a law in Pennsylvania, they are required to keep roads at their pre-use status, and what we’ve really seen in Pennsylvania are these companies upgrading those roads.

 

They’re paying through the gas tax and liquid fuels tax. That’s how we fund roads in Pennsylvania. Those who use the roads pay the liquid fuels tax and that is used to maintain roads. So I think the two major impacts are already covered.

 

There are lots of tax and fee plans out there, but for the most part there are two that matter. If it comes down to a decision between Corbett’s plan and Scarnati’s plan, which do you favor?

 

I am intrigued by the governor’s proposal. Of either of the plans, that’s where I would go if I had to go with one. I don’t even know if we need that, necessarily, but the governor’s plan allows the local government to say: 'We see an impact above and beyond what is being compensated and therefore we are going to implement a tax in our community.'

 

If we have to have one, that’s much preferable to bringing all the money to Harrisburg.

 

A lot of members, including some in the Republican caucus, want to see this money used for Growing Greener or other environmental programs — whether at the state or county level. Doesn’t this make sense as a revenue stream for programs like that, to mitigate damage to the environment?

 

Some of those same people are saying we should be spending this on pre-K education. I mean, the widest spectrum has nothing to do with the environment.

 

That being said, if other programs are deemed worthy, why should we single out one industry just because they seem successful for double taxation in order to fund a program? If we, as a state, believe something is worthwhile, then it should be paid for by all the folks in the state.

 

Did you read the governor’s Marcellus Shale Commission report? Your assessment of it?

 

I see no factual reasons why some of those things are in there. Some of the spacing requirements, setback provisions are arbitrary numbers. Just making current numbers bigger but not saying why they are bigger, I think that’s the easiest one to look at.

 

This week, the Citizens’ Marcellus Shale Commission, which formed in protest to the governor’s commission, released its final report. Among other things, the citizens' commission wants to see a moratorium on drilling in state parks, forests and game lands. Should that be considered?

 

Keep in mind that for a lot of the land they are talking about, the oil, gas and mineral rights are owned by other folks. And I believe in people’s right to exercise their private property rights.

 

Even if that means surface disruptions when the surface has been protected by the state for public use?

 

It’s still your property. What good is owning property if you have no access to it?

 

Where the commonwealth or a commonwealth agency owns the mineral and gas rights, that’s a public debate … . We would have a lot fewer state parks and state forests, if drilling had not been done in the past, because that money has gone into the Oil and Gas Conservation Fund, which is used by DCNR (the state Department of Conservation and Natural Resources).

 

You’ve got some members of your own committee and caucus who favor a statewide impact fee distribution. Are you worried about a mutiny within the caucus, where some members break away and vote for a Democratic plan?

 

I couldn’t imagine they could.

 

It’s in the Democrats’ interest for us not to pass something and then be criticized for it. The only unifying issue in the entire Democratic caucus is taxation of Marcellus shale — all their leaders are for it and all their rank-and-file members. So, to keep that as an issue, it behooves them not to have anything passed.

 

Look at every other issue we have on the floor. Twenty Democrats will be for this one, another 20 will be for that one, but when you start talking Marcellus taxation, they are all for it. And they want to preserve that coalition.

 

To what extent does the inability to get an agreement on shale spill over into other issues on the GOP agenda?

 

It certainly drives a lot of issues, and it is mostly because the Senate Republican caucus has a much higher priority on it. I think they are driven more by their southeast membership, so they have a much higher priority on getting a Marcellus tax that provided funding for other programs.

 

Sen. Scarnati might be the spokesperson, and Pileggi (state Sen. Dominic Pileggi, R-Chester) also, but that is a caucus position. So if that is their top priority, it definitely spills into a lot of other issues.