Shale Daily / NGI All News Access

Pennsylvania Fee Debate Takes Summer Break

The Pennsylvania General Assembly won't tackle a tax or fee on Marcellus Shale development during budget talks this summer, but will most likely return to the topic in the fall.

By a party line vote of 30-20 the Republican-controlled state Senate approved a $27.2 billion 2011-2012 budget Tuesday that did not include a severance tax or an impact fee on natural gas.

That same day the state House planned to consider adding an impact fee to the budget, but backed off after Gov. Tom Corbett once again said he wouldn't consider a fee until after his Marcellus Shale Advisory Commission releases its report next month (see Shale Daily, March 29). A veto would have kept lawmakers from meeting their June 30 deadline for passing a spending plan.

By dropping the fee the General Assembly will likely pass a budget by that deadline for the first time in nine years, but as a result this is now the third straight year where severance tax/impact fee legislation failed to make it into the budget (see Shale Daily, Oct. 22, 2010). In 2010 the state House went as far as to pass a severance tax, but the proposal died in the state Senate.

While that effectively ended those discussions in previous years, momentum behind a tax or fee of some kind on the industry is much stronger this time around, according to Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a nonpartisan think tank.

"Once the [Marcellus Shale Advisory Commission] reports, the way is clear. There's growing support for some type of action in both houses of the legislature," Ward told NGI's Shale Daily.

Corbett is firmly opposed to any tax that would bring revenue to the General Fund, but said he would be willing to consider an impact fee. The Marcellus Shale Advisory Commission is studying the local impacts of shale development -- good and bad -- as part of its mission.

That report is due July 22.

Despite the promise of a veto Democrats pushed for an impact fee in the days leading up the vote and decried that the slim budget passed up a revenue source (see Shale Daily, June 27; June 22).

"Here and now we have bipartisan support on a fair impact fee that would protect the environment as well as continue to grow the tremendous economic impact of the Marcellus Shale industry, yet it remains unfinished business," said Sen. John Yudichak of northeastern Pennsylvania.

Pennsylvania lawmakers are currently considering five different impact fee proposals, but the primary vehicle is Senate Bill 1100 proposed by Senate President Pro Tempore Joe Scarnati.

The original bill proposed a $10,000 annual fee per well adjusted by production volumes and natural gas prices, but a committee removed the adjustments and imposed a $50,000 annual fee that gradually declines over the first decade of production (see Shale Daily, June 15; June 13).

Senate Democrats want a $17,000 annual fee adjusted by price and production.

Before dropping the idea for the summer the House planned to consider a proposal by Rep. Dave Reed, a Republican from western Pennsylvania, that would impose a graduated fee similar to the current Senate version. The fee would begin at $50,000 per well in the first year of production, drop to $25,000 in the second and third years and drop to $10,000 for the next seven years.

Unlike the Senate version, Reed's proposal would collect and distribute revenues from the fee at a county level, but only among the 33 counties that have shale drilling within their borders.

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