Severance tax compromise bill introduced
http://citizensvoice.com/news/severance-tax-compromise-bill-introduced-1.1193680#axzz1W8W33D4G
Published: August 26, 2011
State Rep. Eddie Day Pashinski, D-Wilkes-Barre, has introduced a bill he believes is a compromise on a Marcellus Shale natural gas severance tax.
Pashinski’s House Bill 1804, which has been referred to the House Environmental Resources and Energy Committee, calls for a competitive severance tax on natural gas extracted from the Marcellus Shale.
The tax revenue would be kept in a restricted account until state lawmakers agree on a formula for distribution.
Pashinski said the issue is a matter of fairness because Pennsylvania is the only major natural-gas-producing state without a severance tax.
“The time for action has come,” Pashinski said. “This is a commonsense approach that is fair to the drillers and the public. The taxpayers would stop losing hundreds of millions of dollars as the debate over how to use the money is resolved.”
Pashinski stated that the public and drillers support a severance tax. A recent poll found seven in 10 people want a drilling tax, and an executive with Chief Oil and Gas, a leading driller in the state, said at a House Democratic policy hearing Pashinski hosted that the company has no problem with a reasonable tax.
“Other businesses pay their taxes and residents are facing property tax hikes and higher costs for food, necessities and even college tuition,” Pashinski stated. “At the same time, companies drilling for natural gas are enjoying tremendous profits without paying their fair share.”
Spread the natural gas drilling wealth
http://citizensvoice.com/news/senators-spread-the-natural-gas-drilling-wealth-1.1187598#axzz1UojFUOX3
By Elizabeth Skrapits (Staff Writer)
Published: August 12, 2011
WILKES-BARRE – With the Susquehanna River as a backdrop, state and local officials made a pitch for environmentally responsible Marcellus Shale development that will create jobs throughout Pennsylvania and a tax on natural gas extraction that will generate revenue for the entire state.
At a press conference at the River Commons on Wednesday, two state senators – Energy Committee Minority Chairman John Yudichak, D-Nanticoke, and Democratic Leader Jay Costa, D-Homestead – stressed the importance of environmental protection and employment opportunities.
Costa’s constituency is in Allegheny County, which has natural gas drilling. Yudichak’s Luzerne County district most likely will not, after exploratory wells came up dry.
But the senators would like to spread the wealth, not only in terms of revenue from a severance tax, but also as far as job creation.
“We’re a commonwealth, and we need to share all of our resources,” Costa said.
The senators believe part of the severance tax revenue should go into a statewide pool of money for environmental grants. Yudichak pointed out how Northeastern Pennsylvania has benefited from similar programs, such as the Growing Greener program.
Luzerne County Flood Protection Authority Director Jim Brozena wants cut state funding restored for programs to help communities damaged in “unforeseen weather events,” like the July 3 flash flooding in Plymouth Township and Plymouth Borough.
Michael Kwashnik, business manager for the International Brotherhood of Electrical Workers Local 163, brought up the need for safety while on the job.
There is no specific program through the federal Occupational Safety and Health Administration to regulate safety at natural gas job sites, Kwashnik said.
He said local IBEW members often work on compressor stations – if a company doesn’t bring in out-of-state or undocumented workers or unlicensed subcontractors.
It’s up to each individual gas company to have its own safety program implemented, Kwashnik said. Many of them have safe work sites and hire skilled, trained professionals, but there are a few “wildcat” companies only looking to make a quick buck, he said.
“Some of them are very safe. Others throw safety to the wind,” he said.
In one case, IBEW members were called in to fix a compressor station near Elmira, N.Y. that blew up two days after it was completed, Kwashnik said. He said it turned out the gas company had hired 22 undocumented workers.
The drilling industry needs millions of gallons of water for hydraulic fracturing, which involves blasting the chemical-treated water thousands of feet underground to break up the shale and release the gas. The Susquehanna River Basin Commission regulates water withdrawals from all sources in the river’s watershed.
Paul Swartz said in his 20 years with the commission, potential effects of natural gas drilling on the river have caused more concern than any other issue.
Swartz said the commission’s position on natural gas drilling is “you can have your cake and eat it too.” But only if proper regulations and laws are in place and agencies like the Susquehanna River Basin Commission have the ability to enforce them, he said.
Swartz said he does not want to see the same type of issues as with coal mining and timbering.
Yudichak also brought up the legacy of environmental degradation left by the coal barons for the taxpayers to clean up.
That’s what Shavertown resident Audrey Simpson, who held a sign stating, “Gas drilling boom-bust economy is not the answer,” fears.
“When the gas companies are done with Pennsylvania, what economy are we going to have left?” she said. “There will be no tourism, no state parks, no state forests. What kind of future is that?”
Jim Straub of Kingston wanted to know whether the state and local municipalities would get royalties for drilling underneath roads. He doesn’t oppose drilling.
“This is not going to stop,” he said. “We’ve just got to make sure we get enough compensation in the meantime.”
Costa said compensation might not come in the form of royalties, but municipalities would receive money for infrastructure with a severance tax or impact fee.
eskrapits@citizensvoice.com, 570-821-2072
Air, rail needs emphasized for Marcellus Shale region
http://republicanherald.com/news/air-rail-needs-emphasized-for-marcellus-shale-region-1.1184992
BY ROBERT SWIFT (HARRISBURG BUREAU CHIEF rswift@timesshamrock.com)
Published: August 6, 2011
HARRISBURG – Freight railroad lines and airports in the Marcellus Shale drilling regions would be targeted for improvements under recommendations made by two gubernatorial commissions.
The Governor’s Marcellus Shale Advisory Commission and Transportation Funding Advisory Commission both addressed the issue in reports released within the past two weeks.
Commission members suggested that improving both types of transportation will help the long-term development of deep gas reserves and reduce highway congestion from truck traffic associated with drilling operations. One recommendation would earmark revenue from an existing state surcharge on tickets issued for speeding and other moving vehicle violations to a new fund to pay for rail, airport and port infrastructure projects statewide.
The various recommendations are now being studied by Gov. Tom Corbett and lawmakers.
The Marcellus commission recommends giving priority to an evaluation of rail freight systems in the Marcellus regions in order to relieve the burden on roads and bridges from transporting sand, water and pipe to serve gas well operations. Another suggestion is for the state to partner with local rail authorities to seek federal rail freight dollars for this effort.
The Marcellus commission also recommends the state Transportation Department’s Aviation Bureau undertake a detailed assessment of air service needs at airports in the region in order to capitalize on economic opportunities from gas drilling.
The transportation commission focused more on finding new revenue sources for the state’s transportation system. The commission’s report noted short-line railroads in the northern tier counties need money to fix and maintain track, bridges and switches in order to support drilling operations. If more drilling materials can be shipped by rail, it will reduce truck traffic, the report states.
Pennsylvania airports get revenue from a tax on jet fuel, but revenue only covers a quarter of the improvements needed, the report states.
To address these needs, the commission recommends creating an “Intermodal Transportation Fund” for rail freight, aviation, passenger rail and ports across the state. Revenue from an existing surcharge on tickets for moving vehicle violations that currently goes to the all-purpose state General Fund could be diverted to the new intermodal fund, the commission said.
If that happens, its report projects $7 million in new revenue for aviation in fiscal 2012-13 going up to $11 million in five years and $9 million for rail freight in fiscal 2012-13 going up to $17 million in five years. The entire fund would have $54 million in 2012-13.
Before this, lawmakers have sought to provide potential funding for rail freight projects in the Marcellus region in a piecemeal fashion by adding authorizations to capital budget bills. The state pays for capital projects through the sale of bonds to investors and the governor decides which projects get the green light. It’s a tough competition and projects can remain on lists for years.
Fee proposed but tax ruled out on hydraulic fracturing
http://www.reuters.com/article/2011/07/22/natgas-fracking-pennsylvania-idUSN1E76L19Y20110722
Jul 22, 2011 2:38pm EDT
By Edith Honan
- Fee proposed but tax ruled out on hydraulic fracturing
- No specific amount for free recommended
- Commission aims to create road map for regulation
NEW YORK, July 22 (Reuters) – Pennsylvania, home to the nation’s richest natural gas deposit, released recommendations on Friday that included requiring drillers to pay an impact fee but ruled out a new state tax on extracting gas.
The long-awaited report from the governor’s Marcellus Shale Advisory Commission’s aims to provide a road map for the state legislature to regulate the booming shale gas industry, balancing the need to generate revenue while also promoting more drilling.
The commission recommended charging an impact fee for costs incurred by municipalities as a result of drilling, such as for the upkeep of roads, but declined to propose a specific amount, saying that decision will be left up to the Republican governor and the Republican-controlled state legislature.
But the fees almost certainly would amount to less than $300 million that the previous, Democratic governor had hoped to raise through a wellhead tax that was rejected by Republicans in the legislature.
The commission also recommended doubling penalties for civil violations — which in the more serious instances could involve leaks and spill — from $25,000 to $50,000 and double daily penalties from $1,000 to $2,000.
Pennsylvania sits above the Marcellus shale formation, which could meet U.S. gas demand for decades, and has become the flash point for a U.S. debate on the extraction method hydraulic fracturing, or fracking.
Fracking involves blasting shale rock with chemical-laced water and sand to release trapped gas. Some environmental and public health activists say it taints drinking water supplies.
The 30-member commission was created by Governor Tom Corbett, who took office in January with a strong anti-tax stance and described the gas industry as an economic engine for the cash-strapped state.
Corbett, who according to the website Marcellus Money has received $1.6 million in industry campaign contributions, is opposed to a severance or wellhead tax on gas drilling. Pennsylvania is the only gas-producing state without such a tax.
Proponents of those taxes say they would raise needed revenue and help pay for the environmental costs of drilling.
The recommendations include increasing the distance between gas well sites and drinking water systems and training more Pennsylvania residents to work in the industry.
“Today, Pennsylvania is taking an important first step toward creating tens of thousands of jobs and leading the nation toward energy independence and doing so in an environmentally responsible way,” said Lieutenant Governor Jim Cawley, who led the commission.
A study by current and former Pennsylvania State University researchers — released this week funded by the natural gas drilling industry — said the state’s economy will get a $12.8 billion boost from drilling this year, more than double the amount from 2009, while reaping nearly 140,000 jobs.
Pennsylvania, until recently a net importer of natural gas, could surpass Texas as the top exporting state within the next decade, the report said.
A well belonging to one of the state’s largest drillers, Chesapeake Energy (CHK.N) blew out in the town of LeRoy in April, spilling thousands of gallons of toxic drilling fluid and causing anxiety among local residents.
Shale commission faces votes on future of drilling
http://citizensvoice.com/news/shale-commission-faces-votes-on-future-of-drilling-1.1173999#axzz1S4wWwA8r
By Robert Swift (Harrisburg Bureau Chief)
Published: July 12, 2011
HARRISBURG – The governor’s Marcellus Shale Advisory Commission starts its endgame Friday with members voting in public on what recommendations to put in a comprehensive report guiding the future of natural gas development in Pennsylvania.
This will be the last working meeting of the commission before the July 22 deadline to hand a report to Gov. Tom Corbett.
Heading the agenda will be a series of votes on proposals offered by four working groups established when the commission began its work in March.
The proposals that garner a majority vote from the members will be included in the report, said Chad Saylor, spokesman for Lt. Gov. Jim Cawley, the commission chairman. The bulk of the proposals deal with public health and safety and environmental protection issues, he added.
The commission members are reviewing the working group proposals, therefore allowing for last-minute discussions before the meeting agenda is set, Saylor said.
One of the most closely watched issues facing the commission is levying an impact fee on drillers to offset the cost of drilling operations for municipalities, and additionally address environmental issues related to drilling.
Saylor was unable to say whether an impact fee recommendation will be voted on Friday, but he said a lot of attention was focused on impact fees in the working group that dealt with local impact and emergency preparedness issues relating to drilling.
House and Senate Republican leaders put off plans to vote on impact fee legislation at the close of the spring legislative session after Corbett said he would veto any bill with those provisions that reached his desk in advance of the commission’s report. Corbett has suggested he wants to see what the commission recommends concerning an impact fee, but he doesn’t think impact fee revenue should go to the all-purpose state General Fund.
Cawley has repeatedly said the issue of a state severance tax on natural gas production is off the commission’s agenda given Corbett’s strong opposition to that idea.
Likely to be in the mix for consideration are recommendations offered by the Department of Environmental Protection and Health Department.
DEP has outlined a major overhaul of the state Oil and Gas Act with stronger buffer zones to keep natural gas drilling away from water sources, tougher penalties and bond requirements and a “cradle-to-grave” manifest system to track wastewater from hydraulic fracturing. For example, DEP recommends restricting well drilling within 1,000 feet of a public water supply and doubling the distance from 250 feet to 500 feet to separate a gas well from a private well.
The Health Department wants to create a registry to monitor and study data on the health conditions of individuals who live near drilling sites.
“In order to refute or verify claims that public health is being impacted by drilling in the Marcellus Shale, there must be a comprehensive and scientific approach to evaluating over time health conditions of individuals who live in close proximity to a drilling site or are occupationally exposed,” said Health Secretary Eli Avila in a presentation to the commission last month.
Zoning is another issue on the commission’s radar screen.
In a May presentation, the industry-oriented Marcellus Shale Coalition called attention to a “patchwork” of ordinances dealing with such subjects as road use and well site setbacks. The Coalition called for consistency in zoning powers and not singling out activities by the gas industry.
rswift@timesshamrock.com
Marcellus Shale Job figures disputed
http://www.timesleader.com/news/Job-figures-disputed.html
June 22, 2011
Report says new hires are not same as new jobs. Coalition claims economic growth.
HARRISBURG – The Keystone Research Center in a policy brief Tuesday asserts that the number of jobs created in Pennsylvania by the Marcellus Shale boom has been much less than cited in recent news reports.
The brief claims that figures of approximately 48,000 new jobs created between late 2007 and 2010 are “exaggerated claims” that rely on data about “new hires,” which are not the same as new jobs.
“New hires” track additions to employment but not separations due to resignations, firings or replacements.
Between the fourth quarter of 2009 and the first quarter of 2011, Marcellus industries added 48,000 “new hires,” while all Pennsylvania industries added 2.8 million “new hires.”
But “as Pennsylvanians well know, the commonwealth has added nothing like 2.8 million jobs to the economy since 2009” and, in fact, only 85,400 new jobs were created, according to a research center press release.
“The number of new hires by itself tells half the story and is not a meaningful indicator of job creation,” said Stephen Herzenberg, executive director of the Keystone Research Center. “You have to also look at the number of people who leave jobs.”
Between the fourth quarter of 2007 and the fourth quarter of 2010, according to the latest report from the state Department of Labor and Industry’s Center for Workforce Information and Analysis, all Marcellus Shale-related industries added 5,669 jobs. Six industries in what CWIA defines as the “Marcellus Core” industries added 9,288 jobs during this period. During the same three years, 30 industries in a group CWIA calls “Marcellus Ancillary” actually lost 3,619 jobs, according to the brief.
Overall, Marcellus job growth is small, accounting for less than one in 10 of the 111,400 new jobs created since February 2010, when employment bottomed out after the recession, the report finds.
Even if Marcellus Shale-related industries had created no jobs in 2010, the state still would have ranked third in overall job growth among the 50 states.
“The Marcellus boom has contributed to job growth, but the size of that contribution has been significantly overstated,” Herzenberg said.
“To explain Pennsylvania’s relatively strong recent job growth requires looking at factors other than Marcellus Shale, such as the state’s investments in education, renewable energy, work-force skills, and unemployment benefits,” he added.
The report also states that any economic benefit from the Marcellus Shale must be balanced against the impact of drilling on other industries, such as tourism and the Pennsylvania hardwoods industry.
To sustain Pennsylvania’s strong economic performance, policymakers should adopt a drilling tax or fee that helps finance job-creating investments in education and the economy, as well as providing resources to protect the environment and address infrastructure needs, the report recommends.
Marcellus Shale Coalition President and Executive Director Kathryn Klaber called the brief a “thinly veiled, politically timed attack on an industry that is creating family-sustaining jobs for men and women across the commonwealth.”
Klaber said Marcellus development is fueling economic growth, employment and investments in roads and infrastructure at rates not seen in decades.
“According to the Department of Labor and Industry, unemployment in counties with Marcellus development remains below the state average. Along Pennsylvania’s Northern Tier, where development is most concentrated, employment has jumped 1,500 percent since the end of 2007,” Klaber said.
Furthermore, Klaber said, Marcellus operators are investing billions of dollars into Pennsylvania’s economy – from constructing state-of-the-art operating facilities, to building new offices, to leasing land for responsible development and driving economic growth in our rural communities.
“Take into account the more than $1 billion in taxes generated by Marcellus activity over the past half-decade, stable and affordable energy prices made possible by responsible natural gas development, and the ancillary employment impacts cascading through businesses across the commonwealth, and only then can the full act of Marcellus development be realized. Once again, the rhetoric of opponents of Pennsylvania’s clean and abundant energy supply is simply not squaring with reality,” Klaber said.
“People who were out of work and now have jobs thanks to Marcellus development are more than statistics, and they are proud that they now have jobs. Attempting to trivialize their new employment opportunities simply to fulfill a political agenda not only denies the real economic benefits from Marcellus, but also demeans the very people who are employed,” she said
Poll: Pa. voters strongly back drilling, tax on energy companies
http://www.timesleader.com/news/Poll__Pa__voters_strongly_back_drilling__tax_on_energy_companies_06-15-2011.html
Posted: June 15, 2011
Sixty-three percent support drilling, and 69 percent approve of an extraction tax.
HARRISBURG — Pennsylvania voters support natural gas drilling in the Marcellus Shale by a 2-to-1 margin, according to a new poll that also shows strong backing for an extraction tax on energy companies.
The Quinnipiac University poll released Tuesday shows that 63 percent of Pennsylvanians say the economic benefits of drilling outweigh the environmental impacts, while 30 percent express the opposite view.
The poll appears to reflect the prosperity that drilling has brought to economically struggling regions of the state. Drilling firms and related industries added 72,000 jobs between the fourth quarter of 2009 and the first quarter of 2011 — at an average salary higher than the statewide average, according to the state Labor Department.
Meanwhile, 69 percent told pollsters they support a drilling tax on gas companies, unchanged from an April survey. Pennsylvania remains the largest gas-drilling state without an extraction tax. The state Senate plans to debate a bill as early as next week that would impose an “impact fee” on natural-gas drilling.
“‘Drill, baby, drill,’ is the call from Pennsylvania voters, and ‘tax, baby, tax,’ is the follow-up as voters see natural gas drilling in the Marcellus Shale as an economic plus more than an environmental negative,” said Tim Malloy, assistant director of the Quinnipiac University Polling Institute. “They also see added taxes on gas drillers as one of the few acceptable ways to help balance the budget.”
Gov. Tom Corbett, who promised in his 2010 campaign not to increase taxes or fees, has said recently he would consider a fee that helps drilling communities cope with the impact.
The Quinnipiac poll also shows that Pennsylvanians’ views of Corbett differ markedly along gender lines as he approaches six months in office.
Pennsylvanians as a whole remain divided over Corbett, with 39 percent approving of the job he’s doing and 38 percent disapproving. The numbers are similar to April’s poll results.
But men and women have much different impressions of Corbett’s performance. Tuesday’s results show 30 percent of female respondents approved, compared with 48 percent of men. The 18-point gap is more than twice the 7-point margin in the April 29 poll.
Republican Pileggi proposes severance tax to help seniors
http://citizensvoice.com/news/drilling/republican-pileggi-proposes-severance-tax-to-help-seniors-1.1156511#axzz1OVCl9M3c
By Robert Swift (Harrisburg Bureau Chief)
Published: June 3, 2011
HARRISBURG – A Senate Republican leader wants to levy a state Marcellus Shale severance tax as a way to pay for a freeze on school property taxes for senior citizens.
Majority Leader Dominic Pileggi, R-Chester, sent a memo to colleagues seeking support for a “reasonable and competitive” severance tax to generate about $250 million annually for tax relief targeted for individuals 65 and older who have qualified for a homestead exemption for at least five years.
“The tax burden would be shifted from seniors, many of whom are struggling to stay in their homes on a fixed income, to companies involved in natural gas drilling in Pennsylvania,” said Pileggi.
Pileggi has yet to introduce his bill. The senator said the tax will be based on an as of yet unspecified fixed rate applied to both the volume and price of gas.
He considers the proposal revenue neutral since all severance tax revenue would go to a dedicated fund to reimburse school districts for revenue lost due to the tax freeze.
This is a telling point in light of a flap over whether the drilling impact fee legislation sponsored by Pileggi’s colleague, Senate President Pro Tempore Joseph Scarnati, R-Jefferson County, is a tax increase or not.
Grover Norquist, the head of Americans for Tax Reform, wrote to senators last week saying the impact fee bill is a tax increase. As a result, he said, any state lawmaker who signed ATR’s anti-tax hike pledge would be violating that pledge if they voted for the impact fee bill.
The ATR pledge contains a provision that a tax increase is acceptable if directly offset by a tax cut of equal size so it becomes revenue neutral. Scarnati countered that his impact fee bill doesn’t increase taxes and will be offset anyway by several state business tax cuts.
Pileggi said he supports Scarnati’s plan to use impact fee revenue to cover the costs of the impact of gas drilling on the environment and local governments.
Another GOP lawmaker, Rep. Nick Miccarelli, R-Ridley Park, said this week he will introduce a severance tax bill to pay for a cut in the state personal income tax.
Pileggi is the most prominent GOP lawmaker yet to call for a severance tax, but Republican Gov. Tom Corbett is steadfast in opposition to the idea. These new severance tax bills are an attempt to give political cover to state lawmakers who signed the ATR pledge, said Jan Jarrett, president of PennFuture, an environmental group. Jarrett said the bills help advance the debate over a severance tax, but won’t get her group’s support because they don’t help the environment and local communities.
“You really need to structure a tax in a way to address the extra costs that drilling imposes on the environment and communities,” she added.
Marcellus Shale tax payments in spotlight
http://standardspeaker.com/news/marcellus-shale-tax-payments-in-spotlight-1.1140777
BY ROBERT SWIFT (HARRISBURG BUREAU CHIEF)
Published: May 3, 2011
HARRISBURG – The natural gas drilling industry has paid more than $1 billion in state taxes since the exploration of the Marcellus Shale formation got under way in 2006, according to an analysis released Monday by the state Revenue Department.
However, a Democratic senator found Marcellus Shale drillers have registered some 500 subsidiary corporations in Delaware during the past five years to take advantage of a Pennsylvania tax loophole.
Sen. Christine Tartaglione, D-2, Philadelphia, said on Monday that the subsidiaries have been created using the so-called Delaware loophole that legally allows Pennsylvania businesses headquartered in other states to avoid paying the state corporate income tax on their operations here. The senator based her estimate on her own research of public records in Delaware.
Tartaglione called on Revenue Secretary-designate Dan Meuser to audit the tax return filings of Marcellus Shale firms as they relate to expenses and deductions claimed for Delaware companies. She was joined by several colleagues, including Sen. John Blake, D-22, Archbald, who said they want the Republican-controlled General Assembly to consider closing the Delaware loophole as part of the next state budget.
Tartaglione has introduced legislation to end that practice with “combined reporting,” a mechanism that would require businesses to add together the profits of parent firms and subsidiaries that are integrated economically when filing tax returns. Businesses would pay taxes on an apportioned share of the combined income of the entire corporate group.
“When 70 percent aren’t paying the tax, that’s a violation of every other taxpayer that’s paying the burden,” said Blake.
He said that ending the loophole would enable the state to lower the CNI tax rate, currently at 9.99 percent, by 25 percent.
Business groups have said that combined reporting will make Pennsylvania less competitive because international firms will be reluctant to subject their entire operations on a worldwide scale to state taxes.
Meuser said he has been given clear authority by the governor to enforce state tax laws to discourage tax evasion. He also emphasized the importance of reducing the high state corporate net income tax rate of 9.99 percent.
In his department’s analysis of state taxes paid by the natural gas industry since 2006, the $1 billion is in line with the general reports about economic activity in the drilling boom areas in Northeast Pennsylvania and other sections of the state, said Meuser.
Industry tax payments are growing at a quick rate, said Mr. Meuser. He said that 857 oil and gas companies and their affiliates paid a total of $238 million in state taxes (corporate income, sales, capital stock and franchise and employer withholding) through April. The total state taxes paid by these companies in 2010 was $218 million.
The analysis is based on taxes paid by drilling firms and their subsidiaries, direct suppliers, pipeline companies and distributors, he added.
The analysis attributes $214 million in state personal income taxes paid since 2006 to lease payments going to landowners, royalty income and sales of assets.
Gov. Tom Corbett ordered the analysis shortly after taking office. It appears as debate intensifies at the statehouse over whether the gas industry should be subject to a special state tax or local impact fee.
rswift@timesshamrock.com
Senator proposes per well impact fee
http://citizensvoice.com/news/drilling/senator-proposes-per-well-impact-fee-1.1139222#axzz1Kowy0Mfv
By Robert Swift (Harrisburg Bureau Chief)
Published: April 29, 2011
HARRISBURG – A top Senate Republican leader unveiled a proposal Thursday to levy a fee on each producing Marcellus Shale well to help local governments offset the impact of costly drilling activities.
Senate President Pro Tempore Joseph Scarnati, R-Jefferson County, wants to levy a base $10,000 fee annually on each well. The base fee would be adjusted for increases in the volume of natural gas produced and price of gas (currently at $4.25 per 1,000 cubic feet) on the market. The senator outlined a scenario where the base fee could quickly increase to $25,000 per well.
Scarnati wants to make the fee retroactive for 2010 production. He estimates the fee could generate $121 million by March 1 and potentially $150 million in 2014 as more wells are drilled.
Revenue distribution
The senator would give the state Public Utility Commission the job of collecting the per-well fee and distributing revenues.
Up to 60 percent of the fee revenue would go to municipalities and counties with producing wells under the proposal, as well as to other municipalities in that county. Within that breakdown, 36 percent of revenues would go to counties with producing wells, 37 percent to municipalities with wells and 27 percent to neighboring municipalities in those counties.
Local officials could use the revenue to maintain and repair roads and bridges, improve wastewater and sewage plants, protect water resources and assist local emergency services.
The remaining 40 percent would go to environmental and infrastructure projects overseen by the Commonwealth Financing Authority and to county conservation districts.
Some parts of the proposal are still being developed, such as a requirement that a municipality receiving impact fee revenue not adopt zoning ordinances more restrictive than a model zoning ordinance, to be drawn up by the PUC. It’s unclear whether the model ordinance would address such issues as a set-back for wells from water sources.
Debate in state
Scarnati’s long-awaited fee proposal marks a major development in a statehouse debate stretching back several years on what benefits should accrue to Pennsylvania citizens from the development of the deep pockets of natural gas in the Marcellus Shale formation.
He offered this proposal as an alternative to a state severance tax on natural gas production. Pennsylvania appeared on the brink of enacting a severance tax last year, but prospects faded greatly when Gov. Tom Corbett who campaigned against a severance tax took office in January.
Scarnati’s proposal appears following months of painstaking behind-the-scenes negotiations and at a strategic moment just before the Republican majority legislative caucuses offer counterproposals to Corbett’s proposed $27.3 billion state budget.
Scarnati said the specter of looming state spending cuts in education and social programs to address long-term deficits makes it imperative for lawmakers to act on impact fee legislation at this time. He said his sense is that the public won’t accept budget cuts if there is no impact fee on the natural gas industry.
“I don’t see how we can get the budget process done with all the cuts that are occurring across so many different lines without addressing an impact fee for this industry,” he added.
Scarnati said his proposal is crafted to meet the governor’s stipulation about fee revenue not going to the state General Fund. The governor is waiting for recommendations about an impact fee from his Marcellus Shale Advisory Commission.
“This proposal is well-timed, because our communities need a decision on this matter soon,” said Sen. Lisa Baker, R-Lehman Township. “The distribution of the revenue derived is probably the best yet in terms of addressing community and environmental impacts.”
Sen. John Yudichak, D-Nanticoke, called the proposal a serious one which recognizes that gas companies must pay a fair share. But he expressed concerns about its limited revenue potential. Yudichak recently introduced a severance tax bill.
House Minority Leader Frank Dermody, D-Pittsburgh, said the proposal falls short of what a severance tax would yield.
“This weak alternative is certainly not enough to protect the environment and ensure clean drinking water,” he added.
Scarnati’s proposal drew support from the County Commissioners Association of Pennsylvania. But Myron Arnowitt of Clean Water Action said the proposal is troublesome because municipalities would have to give up their zoning rights to receive fee revenue.
rswift@timesshamrock.com