Pennsylvania Gov. Tom Corbett is getting a lukewarm reception for his proposed changes to state shale policy, which largely mimic the recommendations his Marcellus Shale Advisory Commission made three months ago (see Shale Daily, Oct. 4).
While praising Corbett for outlining his preferred impact fee after months of supporting the idea in concept, Senate President Pro Tempore Joe Scarnati, a Republican from central Pennsylvania, said the governor must be willing to negotiate specifics.
"As we move toward ensuring that communities across the commonwealth are protected from the impacts of drilling, there will be discussion on the percentage that goes to local jurisdictions and what environmental programs will be funded and at what level," Scarnati said, adding that he wants the state Senate to pass legislation by the end of October.
Although state lawmakers have introduced more than 15 tax or fee proposals, the legislation with the most momentum is Senate Bill 1100, which Scarnati introduced in April and a committee revised in June (see Shale Daily, June 15; April 29).
That bill would impose a $40,000 annual fee for each well in the state that decreases to $10,000 over the first four years of production and expires after 10 years. The Corbett proposal is identical in that regard, but it would give counties the authority to charge that fee, as well as the ability to offer credits to companies that invest in natural gas infrastructure.
That doesn't work for Sen. John Yudichak, a Democrat from northeastern Pennsylvania and chairman of the Senate Environmental Resource and Energy Committee, which will be the early eyes on any shale policy legislation.
"The governor's county-assessed fee approach will create a fragmented patchwork of 'have and have not' communities across Pennsylvania. It completely overlooks countless communities across Pennsylvania that have road, water system and other infrastructure demands placed upon them," Yudichak said, adding that the state doesn't tax any other industry by "point of origin."
In the ongoing debate over potential severance taxes and impact fees, members of the Pennsylvania General Assembly have said any proposal that does not bring money to the entire state -- particularly the populous region around Philadelphia that does not overlie the Marcellus Shale -- faces an uphill battle. "Tax revenue from southeast Pennsylvania benefits the entire state," said state Rep. Greg Vitale, a Democrat from the Philadelphia area and a continued supporter of a severance tax rather than an impact fee. "It's only fair that revenue from a Marcellus impact fee be shared throughout the entire state."
That sentiment crosses party lines in the region.
State Reps. Thomas Murt and Gene DiGirolamo, both Republicans of southeastern Pennsylvania, plan to introduce a 4.9% per Mcf tax on the gross wellhead value of "deep gas reserves," such as the Marcellus and Utica (see Shale Daily, Sept. 26).
That proposal, endorsed by a coalition of Corbett critics including Citizens for Pennsylvania's Future and the Pennsylvania Budget and Policy Center, would generate $362 million in the coming fiscal year and $562 million annually within five years, nearly triple the $200 million Corbett estimated his impact fee would generate annually within six years.
The Corbett proposal would keep 75% of the money raised from the fee at the local level to cover a specific list of negative impacts of development, from infrastructure repairs to emergency response to increased municipal workload, but discussions going forward must focus on "legitimate impacts that are not currently being addressed and compensated by the industry," according to Lou D'Amico, executive director of the Pennsylvania Independent Oil and Gas Association (PIOGA).
"We agree with a number of principles cited in the governor's proposal," D'Amico said, including keeping revenues local, funding statewide emergency response and fire protection programs and exempting conventional oil and gas producers.
The Corbett proposal would also strengthen regulations, including widening the setbacks between wells and water sources, increasing bonding and penalties, and expanding the presumed liability of industry in water contamination cases.
That's a step in the right direction, but it doesn't go far enough, according to environmental group PennEnvironment. "The proposal allocates impact fee money to environmental cleanup, which is far more expensive than pollution prevention," said PennEnvironment clean water advocate Erika Staaf. "Wouldn't a true fiscal conservative set stringent safety and environmental standards on the front end to avoid expensive cleanup that will likely be paid by taxpayers on the back-end?"
Staaf also said that the proposed 300-, 500- and 1,000-foot setback from water sources should be closer to 5,000 feet.