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Marcellus Tops Fall Agenda for Pennsylvania Lawmakers

When they return from summer recess on Monday (Sept. 19), Pennsylvania lawmakers will take up a tax or fee on natural gas developers, pipeline safety measures and a model ordinance for local governments, but they probably won't discuss forced pooling, legislative leaders told an audience in Philadelphia last week.

Although state lawmakers introduced dozens of bills related to the Marcellus Shale last year, only two eventually became law. The Pennsylvania General Assembly seemed eager to pick up the pace this year, but Pennsylvania Gov. Tom Corbett pushed many major decisions to the fall while his Marcellus Shale Advisory Commission compiled and released its policy recommendations (see Shale Daily, July 25).

"Now that that report is out, I think you're going to see more legislative activity," Senate Majority Leader Dominic Pileggi, a Republican from the southeastern Pennsylvania, said on a panel of Pennsylvania lawmakers at the Shale Gas Insight 2011 conference hosted by the Marcellus Shale Coalition.

State lawmakers have a backlog of at least 100 Marcellus-related bills. "We have a lot of other issues on the agenda, but none, in my view, are more important than finally bringing this basket of issues out of the realm of discussion and into the realm of statues that become the law of Pennsylvania," Pileggi said.

The biggest issue is passing a severance tax or an impact fee. While support is broad for any measure to increase the amount of revenue the state gets from the industry, the way there is rocky. With Corbett promising to veto any tax but willing to consider a fee to cover the impacts of development, Pileggi said, "That's what's achievable in present Pennsylvania, and I think that's what we should focus on."

But the severance tax isn't dead, according to Democratic Whip Rep. Mike Hanna of central Pennsylvania. House Democrats want a severance tax larger than the one in Arkansas, but smaller than the one in neighboring West Virginia, and want it to fund statewide environmental programs, Hanna said. An impact fee could unintentionally end the investments industry is already making to local infrastructure, he said, such as the $52 million in road improvements one company made over two years in his district.

"We don't want to lose the support that we've gained from you," he said.

But Hanna and Pileggi both noted that regional politics trumps party politics when it comes to the Marcellus and that any tax or fee proposal would need to have support not only the drilling hotspots in northeastern and southwestern Pennsylvania, but also from the Marcellus-free Philadelphia area.

One issue with that broad support is pipeline safety. The Senate and House passed similar bills earlier this year to make the Pennsylvania Public Utility Commission a state agent for the federal government on gathering lines. Those bills differ in how they handle gathering lines in remote areas, though, and must be reconciled (see Shale Daily, Aug. 30).

An issue with much less support is the role of local governments as regulators. "What is the right balance between local control and state regulation of various activities involved in the extraction of gas?" Pileggi asked. "That needs a statutory framework and we intend to provide one."

While he acknowledged the tradition of local control in Pennsylvania -- a state with more than 2,500 local government entities -- Pileggi said a statewide ordinance could work, depending on the scope.

Pileggi represents a region of the state where municipalities aren't facing those decisions. Rep. Sandra Major, a Republican from the most prolific corner of northeastern Pennsylvania, agreed that the issue must be discussed, but said she supports local control "because of the diversity within my rural areas."

Companies are increasingly sparring with cities over zoning codes (see Shale Daily, Aug. 18; April 13).

An issue with even less consensus is forced pooling, a mechanism that allows an operator to compensate a landowner for gas extracted without a lease if all the surrounding landowners have leased their property. Industry sees the concept as a way to conserve resources and reduce surface impact, but many, including Corbett, oppose the idea, calling it a form of eminent domain (see Shale Daily, June 9; April 27).

Pileggi, Hanna and Major all said the industry did a poor job of explaining the concept to landowners during the early days of the Marcellus boom and now face an uphill battle to gain support for it. But Hanna said landowners in his district have come to understand the value of pooling, even if they oppose leasing their land. With more people reaching that conclusion, "it may be able to be addressed," he said.

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