Senate panel OKs impact fees on shale gas wells

Drillers may have to pay initial assessments of $40,000 per well

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HARRISBURG -- Pennsylvania is a step closer to assessing a fee on shale gas drillers, but Senate lawmakers supporting that measure said Tuesday that they had a list of revisions to work into the final version.

The Senate Environmental Resources and Energy Committee voted unanimously to move forward on a plan to charge drillers an initial $40,000 fee per gas well. Changes approved by that panel raised the fee's initial cost, and also tweaked how that revenue is doled out.

It's the first tax or fee on natural gas drilling that has cleared a Senate committee, since former Gov. Ed Rendell first urged creation of a severance tax two years ago.

Senate President Pro Tem Joe Scarnati, who introduced the impact fee bill, said after the committee vote that he supported the changes that have been made thus far. He pointed to public pressure on lawmakers as an impetus to approve it with the state budget this month.

"Although these dollars will not be able to fill the vast holes we have in many of the line items of the budget, the public has a perception that while we are cutting many line items in this budget, we are allowing an industry in this commonwealth to go without paying their fair share," said the Jefferson County Republican.

"I can debate that perception, but it is the public perception," he said.

New public polling numbers released Tuesday by Quinnipiac University reflect that view, with 69 percent of Pennsylvanians saying they support a tax on drillers to help balance the state budget.

That support for a tax on gas from the state's Marcellus Shale was highest in the drilling-free southeast, where 77 percent of respondents backed the levy. But it was still strong in the southwest, with 72 percent in favor, and in Allegheny County, with 68 percent.

By more than 2-to-1, those surveyed said they welcomeed drilling and its economic benefits, rather than opposed it due to environmental risks.

Gov. Tom Corbett opposes a gas severance tax.

The governor has said he would consider a drilling impact fee that does not go to the state's operating budget, but that he first wanted a recommendation from his Marcellus Shale Advisory Commission on the need for such a fee.

State Sen. Mary Jo White, who chairs the Senate environmental committee, said the changes she offered Tuesday were intended to turn what she viewed as a severance tax into a fee to mitigate drilling impacts.

"Since we are in an environment where we have pretty much been put on notice that we will not have new taxes that will make it across the finish line, this is my best attempt to give some relief to those communities that are experiencing impacts," Ms. White said.

The revised version hikes what was a $10,000 base fee, which would have fluctuated based on natural gas prices and production levels. Now drillers would be assessed a per-well fee of $40,000, which would drop annually to $10,000 in years four through 10.

Up to 30 percent of that fee's cost would be credited if a drilling company donates to a local affordable-housing organization.

Most of the money collected would still be reserved for local governments, and could be spent on roads, bridges and water and sewerage systems. Other revenues would go to statewide infrastructure projects, and starting in 2012, $1 million would be set aside for emergency responder training and equipment.

The measure, which would be retroactively assessed against wells that were in production last year, is estimated to raise a combined $180 million for 2010 and 2011, and $137 million in 2012.

Those numbers could still change as lawmakers continue to negotiate a plan to send for the governor's signature. Asked whether the fees could increase during those talks, Mr. Scarnati replied: "They won't go down."

But his fellow lawmakers expressed concerns about other provisions, focusing much of the criticism on a model drilling ordinance. A local government could not have rules more strict than that ordinance without forfeiting its share of the fees.

Sen. Ted Erickson, R-Delaware, said he did not support "limiting local prerogative," referring to local government's ability to manage drilling activity.

He and Sen. Andrew Dinniman, D-Chester, both also pushed for a larger share for their region, citing the potential hazards from a growing maze of natural gas pipelines.

"There is no money that will come from the Marcellus Shale unless there is a means to get it to the marketplace, and the means to get it to the marketplace comes through our counties," Mr. Dinniman said.

Laura Olson: or 1-717-787-4254.


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