State Senate panel approves impact fee on drilling

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HARRISBURG -- With approval from a key Senate panel on Monday evening, legislation to assess an impact fee on gas drillers and strengthen oversight of that industry is poised for a final vote in that chamber later today.

The latest changes, which were approved on a nearly party-line vote of 17-9, re-inserted a beefed-up drilling fee and would allow for the attorney general's office to review local zoning rules related to natural gas extraction.

Those revisions -- the result of months of negotiations between a bipartisan group of senators -- were met with disappointment by Democrats who said the proposed fee was still far too low.

But Senate President Pro Tem Joe Scarnati, R-Jefferson, defended his fee proposal as reasonable, also pointing to environmental safeguards recently added to the bill and the ability for localities to retain some autonomy over their zoning rules.

"Those have been the three components that have eluded us over the past months and year, and so we found something to bring it together," Mr. Scarnati said.

Passage of a drilling fee in the Senate would be a first in that chamber. And with the number of remaining session days this year in single digits, its approval would set up long-awaited talks between lawmakers and Gov. Tom Corbett on a final bill.

The new state-assessed impact fee from Mr. Scarnati would levy an initial base cost of $50,000 per well, which would decrease annually until years 11 through 20 that a well is producing, with a cost then of $10,000 per well. That price tag would increase if natural gas prices rise.

An earlier version of the bill would have set the fee for a well's first year of production at $40,000 and assessed it at a decreasing rate for only 10 years. That rate currently is included in a House fee proposal.

Revenues from the fee would be split between the state and local levels, with 55 percent going to counties and municipalities in the Marcellus Shale region and 45 percent to statewide infrastructure projects, environmental programs and other projects related to natural gas production.

Other funds also would be set aside for county conservation districts, training programs conducted by the state fire commissioner, the Fish and Boat Commission and for boosting availability of affordable housing.

Republican staffers said the fee proposal would raise $94 million from wells that were producing gas this year, a figure that would rise to $155 million next year and $255 million by 2014.

An additional $27 million would be collected on wells that were producing gas prior to Jan. 1, with those dollars to be used solely for converting fleet vehicles to use natural gas and building fueling stations.

Sen. Jim Ferlo, D-Highland Park, and other Democrats on the panel decried that fee plan, calling it "irresponsible." They also voiced opposition to allowing state government to determine whether local drilling rules are reasonable.

Using a method similar to how certain agriculture ordinances currently are reviewed, the attorney general's office could be requested to compare a municipality's drilling ordinance against a statewide zoning standard. If that rule is stricter than the commonwealth's standard for oil and gas operations, that town would become ineligible for any fee proceeds.

"This bill, as presently written, still runs roughshod upon zoning rules," Mr. Ferlo said.

The Corbett administration, however, so far has favored an approach that would entirely pre-empt local regulation of drilling operations, arguing that standardized rules would encourage natural gas companies to continue creating jobs in Pennsylvania.

Mr. Scarnati noted that the state's association of township supervisors and other municipal groups are backing his approach on zoning.

Sen. John Wozniak, D-Cambria, was the only member of his caucus to join GOP lawmakers in advancing the measure.

"This is the best deal we're going to be able to get right now," Mr. Wozniak told his colleagues. "I wish we were putting a few more dollars on the table ... but it's time to cut the rug."

Across the Rotunda, the state House of Representatives also briefly begin debate on potential amendments to their own drilling impact fee and regulatory measure.

Discussion on that House-drafted measure is expected to continue throughout today in an effort to pass legislation by the week's end.


Laura Olson: lolson@post-gazette.com or 1-717-787-4254.


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