First taste of Marcellus Shale fees in the pipe

$204 million raised to compensate for well activity



HARRISBURG -- Officials in the Greene County township of Cumberland got a surprise after Monday's announcement on how much Pennsylvania's towns and counties will receive from the new drilling impact fee.

The municipality will see its annual $2.3 million budget increase by nearly half when a check from the state Public Utility Commission arrives in the next 10 days. Its $1.04 million check is the most of any township statewide.

"That's quite nice," said Bill Groves, chairman of Cumberland's board of supervisors, adding that the township had been expecting about three-quarters of that figure. "We'll make maximum use of it."

Cumberland is among the nearly 1,500 towns and all 67 county governments -- with the exception of four towns pending state review of their drilling rules -- that will share in the $204 million raised in the first round of the state's new drilling impact fee.

Graphic: Chart of impact fees

That annual fee is levied on energy companies operating in the state's Marcellus Shale region. Drillers paid the $50,000 fee on each of the 4,022 horizontal shale wells. Another 311 shallower vertical wells were assessed at a lesser rate of $10,000 each.

Gov. Tom Corbett, who supported the per-well fee over alternative plans for a drilling tax based on gas production, said at a news conference Monday that the fees are structured in a way that will ensure communities bearing the brunt of the activity receive "nothing less than their fair share" of compensation.

"When we were confronted with the challenges and opportunities of this emerging industry, our goal was to get things right," Mr. Corbett said. "I think today's number of $204 million is a clear sign that we did."

The drilling impact fee was approved as part of the Marcellus Shale law, known as Act 13, which passed the Legislature in February. The law also overhauled environmental rules and outlined what towns can and cannot control in regard to gas drilling.

Of the revenues raised through the new law, $109 million is earmarked for county and municipal governments in the state's shale drilling region. The other $95 million will go to state agencies implementing the new drilling rules, incentives for natural gas use, and various infrastructure and conservation projects through Pennsylvania.

The drilling-heavy counties of Bradford and Tioga in the state's northeast and Washington in the southwest will receive the largest local portions.

When factoring in each county's share of the separate statewide "legacy fund," which is designated for bridge and recreation projects, Bradford will get about $8.4 million, Tioga $4.8 million and Washington $4.4 million.

Allegheny County is slated to receive about $1.1 million, a total that includes $79,000 based on the number of local wells and slightly more than $1 million from the legacy fund.

All 67 counties will receive a portion of the legacy fund, based on their population. Philadelphia County, far from shale drilling activity, will receive nearly $1.3 million from that portion of the revenue.

The remaining local dollars not distributed to counties -- about $68 million -- will go to towns that host or are close to well sites. In addition to Cumberland, five other towns are slated to receive more than $500,000: Amwell, Chartiers and Mount Pleasant in Washington County; Morgan, Greene County; and Lawrence, Clearfield County.

But checks for Mount Pleasant and three other southwestern towns that have seen their drilling ordinances challenged -- South Fayette in Allegheny County, along with Cecil and Robinson in Washington County -- will be withheld until state reviews of their rules are completed.

If the towns' ordinances are deemed to overstep their local authority, the towns -- which are part of a lawsuit against the new drilling law -- will not be eligible for funding until their rules are revised.

John Smith, an attorney representing Robinson and Cecil, sent a letter Monday to the PUC protesting its decision to withhold the impact fee dollars. The agency is required to distribute those funds by Dec. 1.

"Nowhere in [the law] is the PUC given the authority to deem a township ineligible for impact fees merely because a request for review is currently pending," Mr. Smith wrote.

Meanwhile, with the long-sought final totals announced, local officials said they can now begin discussing how they will spend their new infusion of money.

"That process starts now," said Greene County Commissioner Pam Snyder, pointing to water and sewer updates, housing assistance and the county's human services programs as top contenders for funding.

Mr. Groves, the Cumberland supervisor, said his township may consider setting aside dollars for its police or fire departments.

Chartiers manager Samuel Stockton, who is expecting the third-largest check of those going to municipalities, said potential uses include easing the cost of a road project or a planned community center.

"Any infusion of funds in these economic times helps ease the burden," Mr. Stockton said.

neigh_city - electionspa - businessnews - marcellusshale

Harrisburg Bureau chief Laura Olson: lolson@post-gazette.com or 717-787-4254. Andrew McGill contributed. First Published October 16, 2012 4:00 AM


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