Pa. could withold South Fayette's impact fee revenue

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In its first official ruling since gaining new powers under the state's 6-month-old Marcellus Shale law, the Public Utility Commission on Thursday told South Fayette to revise its drilling ordinance or it will miss out on this year's impact fee dollars.

Allegheny County community officials said Thursday's decision and the $2,700 it puts at stake won't deter them from maintaining tight local regulations for the burgeoning industry.

"Our only consideration is protecting the health, safety and welfare of our residents and the character of their neighborhoods," said Deron Gabriel, president of South Fayette's board of commissioners.

Mr. Gabriel said he viewed the decision as "more retribution" for South Fayette's opposition to the state law. The township is among a group of municipalities challenging the drilling law, which set statewide zoning guidelines. The group won on the key parts of its challenge at Commonwealth Court, but the state appealed to the state Supreme Court, which heard arguments Wednesday.

A portion of the law related to local zoning was overturned, although two sections regarding municipal rules remain in effect.

The PUC's ruling marks the first official review completed by the commission, which was tasked in the new Marcellus Shale law with determining whether municipal rules overlap with aspects of drilling already regulated by the state.

Three other towns -- Cecil, Robinson and Mount Pleasant in Washington County -- also have had challenges filed against their ordinances. South Fayette's ordinance was challenged this summer by resident and school board member William Sray, who has leased land to Chesapeake Energy for development.

Mr. Sray argued in his letter seeking review that the town's ordinance improperly sets reporting requirements for water withdrawals and hazardous waste disposal, mandates an environmental impact statement from operators, regulates certain types of air emissions and imposes standards for post-drilling restoration.

In the PUC's decision letter dated Thursday, the commission deemed that each of those provisions does conflict with state law.

Those local requirements are regulated by state government, and therefore "present an obstacle to the underlying legislative purpose of the Act requiring only one set of state level" requirements, according to the letter.

Municipalities with drilling rules deemed unacceptable are ineligible for the annual impact fee dollars that drillers pay on each of their gas wells.

The vast majority of this year's $204 million in impact fee revenues will be distributed in the next week, but the commission announced Monday that it would withhold money from the towns with pending ordinance reviews.

South Fayette would be eligible for $2,731.39. The PUC stated in its letter that if the town's ordinance is revised by Nov. 28 -- three days before the agency's Dec. 1 deadline for distributing the money -- South Fayette still could receive that payment. If the township doesn't revise its ordinance to bring it into compliance, South Fayette's portion will be set aside and added to the impact fees that are distributed next year.

The township also could seek a separate opinion from the Commonwealth Court.

Asked Thursday about the potential loss of its share of impact fee dollars, Mr. Gabriel noted that the other towns with pending challenges are risking a much larger infusion of revenue than South Fayette is. Mount Pleasant could receive more than $500,000 from those drilling fees. Cecil would collect $246,000, and Robinson could see $226,000.

A second challenge against South Fayette, filed by gas operator Range Resources, also is pending.

marcellusshale - neigh_west - neigh_south

Harrisburg bureau chief Laura Olson: or 1-717-787-4254.


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