Pennsylvania counties cashing in on Marcellus Shale drilling revenues
When the state Legislature passed Act 13 in February, county and local officials across the state expressed some excitement and more than a little trepidation over whether impact fees for Marcellus Shale gas well drilling would go far enough to compensate for the disruptions and damage blamed on drilling for the valuable resource over the past five or so years.
But now, county officials are finding themselves scrambling to figure out how they will maintain human services, such as those aimed at children, the poor and elderly, in the face of a 10 to 20 percent cut in the state budget.
The impact fee?
No longer the big deal that it was a year ago in the discussion stages, many county officials say.
What sort of impact do Marcellus Shale drilling fees have on local counties and communities? This Post-Gazette graphic helps to explore how these fees could help communities improve infrastructure and services.
"It's a drop in the bucket on one hand, but, with the cuts the governor has given us, it could be a significant amount," said Butler County Commissioners Chairman William McCarrier, a Republican who expects the county to lose as much as $1 million if a proposal by GOP Gov. Tom Corbett for 20 percent budget cuts in human services funds to counties is passed.
The Senate has recently proposed restoration of about half of those funds in the state budget, but that would still leave counties on the hook for a 10 percent cut in funding for services like mental health/mental retardation, children and youth, senior transportation and drug and alcohol rehabilitation programs. The governor's office did not respond to a request for comment.
According to the provisions of Act 13, Butler County stands to gain about $714,000 in impact fee revenue later this year, based on the 78 shale gas wells that have been drilled there in recent years.
With an annual budget of about $190 million, that money probably won't go very far, Mr. McCarrier said.
The county has yet to decide whether to use the proceeds for shale-related projects or just to plug budget holes.
"There are just so may needs; we haven't made up our minds yet," he said. "You can't just leave little children on the streets; you have to take care of people."
In Westmoreland County, the story is much the same, leaving commissioners like Democrat Ted Kopas frustrated over what they see as a missed opportunity.
"It's a drop in the bucket," he said. "I think this tax is way too low and at the end of the day, it isn't going to help anybody."
Mr. Kopas said he was "happy to sign" a letter of support for the seven municipalities that have mounted a legal challenge to what local officials believe are stripped constitutional rights and weak zoning provisions in Act 13.
That argument has yet to wind its way through the court system, but in the meantime, a judge has ruled that the other provisions of Act 13 are to be implemented -- including the impact fee, which is to be collected from drillers in September by the state Public Utility Commission and distributed to state, county and municipal governments by the end of the year.
Exactly how much municipalities will receive is difficult to determine at this stage, because the amount will be based on annual budgets, proximity to gas wells, population and highway miles, though the Pittsburgh Post-Gazette has used state drilling data to determine a minimum amount that municipalities with drilling should receive by year's end.
The fees that the state, counties and municipalities will be splitting will continue on a descending scale for 10 years and are to be based on the price of natural gas and the number of shale wells drilled. This year, the fees are pegged at $50,000 for each of the 4,095 horizontal wells and $10,000 for the 206 vertical wells statewide.
Westmoreland County, with an annual budget of about $300 million, is expected to garner more than $1.2 million this year in impact fees, based on 135 gas wells.
Where that money will be used has not yet been determined, Mr. Kopas said.
"We have not made any final decisions on how this money will be spent," he said. "Over the summer, we're going to hold some public meetings to hear from folks how they want the money spent."
Amie Downs, communications director for Allegheny County, said the $81,486 expected for county coffers -- based on nine wells drilled in Fawn and Frazer -- will be used for general services.
"Anything we receive would go into the general fund," she said.
Counties and local governments are limited in how they can spend the impact revenue, but there is a wide range of spending possibilities, from tax cuts to infrastructure improvements, like sewage, road or bridge projects.
The fee could also be used for social services, environmental programs or emergency preparedness.
In Greene County, which is expecting more substantial revenue of $3.07 million this year, based on 336 wells, commissioners aren't counting their chickens before they've hatched.
"First of all, we don't have the money," said Democratic commission Chairwoman Pam Snyder. "You can't spend something you don't have. So until we have the check in hand, we're not making any commitments or plans."
The impact revenue represents 12 percent of the county's annual budget of $25 million, though Ms. Snyder cautioned that the money is "nothing, when you look at what it costs to replace one county bridge."
Commissioners have bandied about several suggestions, she said, including using the funds as a matching grant for municipalities to complete sewage or water projects.
"Everything is still in the planning stages," she said. "We're just kind of taking it day by day."
Among local counties, Washington is in line for the greatest share of shale revenue, anticipating about $4.5 million this year for its 490 wells.
With an annual budget of about $150 million, commissioners there are open to ideas and suggestions, although, like other counties, they are apprehensive about state budget cuts as well.
"There's so many things that may need to be addressed because of the drilling, and that money will give us the opportunity to make things right," said commission Chairman Larry Maggi, a Democrat who said the county is also considering a "legacy fund," which could be used for environmental impacts, water and sewage infrastructure, or maintenance of county parks.
"It's going to be a pretty open issue," he said. "Anything that drilling would harm, we could use that money for."
Ms. Snyder said decisions about how the impact fees will be spent rely largely on the Legislature and its decision about budget cuts to counties.
"It's very difficult for any county to map out a blueprint for this money right now," she said. "The reality is, we may just be able to sustain with this money."
First Published June 7, 2012 12:00 am