Regulating shale operations: Public Utility Commission would get new role

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The Marcellus Shale legislation awaiting Gov. Tom Corbett's signature would introduce a quiet player into the divided, often loud, world of gas drilling: the Public Utility Commission, a relatively unknown state agency suddenly charged with determining which communities are illegally regulating gas extraction.

The PUC last made headlines when the region's three utility providers filed lower monthly rates for winter, and it also makes decisions involving industries such as telecommunications and transportation. But the agency would also be asked to review the scores of local ordinances that allow municipalities to establish specific setback rules or predrilling requirements.

Under the legislation, the Public Utility Commission has the sector-shifting power to say which communities have overstepped in regulating where and how companies extract natural gas from the Marcellus Shale rock formation.

Officials in Harrisburg say the change would simply add a new industry to the commission's adjudicative portfolio, but the anonymity that led to the choice of the PUC has some wondering what qualifications the state agency brings to the job.

Initial drafts of the bill gave oversight power to the attorney general's office. After a negative response, the state still needed an agency to "call the balls and strikes." Lawmakers wanted officials who weren't already tied up in the emotionally charged issue, said Drew Crompton, the chief of staff for key player Senate President Pro Tem Joe Scarnati, R-Jefferson.

"I want my umpire boring," he said.

The umpire they found is entering a debate that's anything but boring.


The zoning argument has been louder in southwestern Pennsylvania than in the northeast portion of the state, where drilling is rampant but local regulations are not.

Mr. Crompton cited Lycoming County's ordinance in northeastern Pennsylvania as one of the state's "premier" examples of local control -- its setbacks and requirements apply to the entire county and aren't broken up by municipality.

The five-county region around Pittsburgh, though, has seen dozens of local commissioners draft site-specific rules for gas drilling. The industry has long complained that the Balkanized regulation hinders predictability in a sector that plans rigs years in advance.

After the new legislation passed on Wednesday, the Marcellus Shale Coalition lobbying group said the bill was "not perfect" but "provides the industry greater certainty to operate across Pennsylvania."

Communities that the PUC would decide have restrictive ordinances will not receive any of the impact fee revenues approved in the legislation, potentially worth hundreds of thousands of dollars.

Under the legislation, drillers can try to circumvent the PUC by challenging ordinances in Commonwealth Court. And ordinance writers can send a draft of their regulations to the PUC prior to passing, in hopes of avoiding a penalty flag.

"If you're contemplating an ordinance, you can get it marked up" by the PUC, Mr. Crompton said.

The agency has about 500 employees, with headquarters in Harrisburg and regional offices in Pittsburgh, Philadelphia and Wilkes-Barre, Luzerne County. PUC's five commissioners are appointed by the governor and serve five-year terms, but every office also has administrative law judges on staff who are seen as the most likely candidates to review ordinances.

"We do have an adjudicative role now, and we are used to mediating between two parties," said Commissioner Pamela Witmer. She said the commission was "certainly appreciative of the confidence" the state has given it.

After the PUC replaced the attorney general's office in the bill, the Pennsylvania State Association of Township Supervisors asked that additional staffing be given to the commission so it can keep up with the unpredictable onslaught of arcane zoning questions.

"I think whether it's the attorney general, the PUC or anybody, you're still going to have a learning curve with some people getting the expertise in zoning," said Elam Herr, assistant executive director at the township supervisors group.

Lawmakers allotted $250,000 out of the general state fund to help the PUC incorporate the databases needed to track shale development and are planning additional funding to help pay for personnel.

The reception from local officials to the news has been quiet so far, Mr. Herr said.

"I can't say the PUC has been a major issue with our members, and if anybody does have an issue with them, we haven't heard," he said. "That's because they don't deal with them very frequently."

Compared to the charged issues of chemical disclosure and environmental oversight, local zoning control has not emerged as a major issue in states with drilling operations, said Barry Rabe, an energy opinion pollster and professor at the Gerald R. Ford School of Public Policy at the University of Michigan.

"This really strikes me as mission-creep," though, for an organization established in the early 20th century to oversee the development of the electricity industry, he said.

Public utility commissions nationwide have expanded their powers as new forms of energy come to communities, he said, but they rarely "have a lead role in land use or the ability to overturn local decisions."

Mr. Crompton, in Mr. Scarnati's office, attributed any trepidation to the unfamiliarity of this new "umpire" and said the PUC would simply remain a neutral player into what's become a fractious debate.

"I could see why some are a little hesitant because they don't know about the PUC, but that's reason to believe it's going to work," he said.

Erich Schwartzel: or 412-263-1455. First Published February 12, 2012 5:00 AM


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