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