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County Association Wants Pennsylvania to Levy Impact Fee

A nonprofit, nonpartisan group that represents all of Pennsylvania's 67 counties says it supports a local impact fee on natural gas development in the state but has "strong reservations" about counties being ultimately responsible for its levying and administration.

Douglas Hill, executive director for the County Commissioners Association of Pennsylvania (CCAP), told NGI's Shale Daily the group's concerns about counties taking the lead were twofold.

"We don't think it's productive to have a situation where counties -- because of local pressures, pressures from the industry, rates or whether or not they levy -- end up competing against one another," Hill said Wednesday. "The consensus among our members is that a state levy would be more uniform and more predictable."

Hill added that oil and gas companies operating in the state were also seeking consistency and stability.

"Our legislature has been flirting with either a severance tax or an impact fee for a long time, and the industries have had to include that in the reports to their boards and investors," Hill said. "Having one of these in place, one way or another, removes any uncertainty but not in a situation where the fees are levied on a county-by-county basis or at differential rates."

Republican Gov. Tom Corbett has proposed allowing counties to charge a tiered impact fee on shale gas wells (see Shale Daily, Oct. 4). The impact fee would be $40,000 in the well's first year of production, $30,000 in the second year, $20,000 in the third and $10,000 through the well's tenth year. The state estimates the fee could generate $120 million this year and nearly $200 million within six years.

Under Corbett's proposal -- conceived through the Marcellus Shale Advisory Commission (MSAC) -- counties and municipalities would receive 75% of the revenue generated by the fee while the state would get the remaining 25%. The 75% share would be further divided among counties (36%), municipalities with drilling activity (37%) and those without (27%).

CCAP said counties and municipalities do not currently receive direct revenues from Marcellus and other shale gas producers -- as they do from other mineral operations -- based on a 2002 Pennsylvania Supreme Court decision, Independent Oil and Gas et al. v. Fayette County Board of Assessment Appeals. The ruling exempts oil and gas operations from local property taxes.

Nevertheless, the CCAP said, counties "do provide services and incur costs based on gas development, including highway and bridge infrastructure, emergency management planning and response, human services, record-keeping and others. The governor's proposal directs the impact fee proceeds to these types of services, and CCAP notes that the list of allowable expenditures -- and the formulas for distribution of the funds among the municipalities in the county -- mirror proposals offered to the [MSAC] by it and the other local government groups."

Hill conceded that some county commissioners -- he did not identify which ones -- were interested in seeing their counties levy and administer the fee, but he reiterated that a consensus believed it should be the dominion of state government.

The Pennsylvania General Assembly is currently considering more than 15 impact fee and severance tax proposals. Of the 96 recommendations the MSAC included in its 137-page report released this past summer, Corbett estimated that 50 can be handled by the existing authority granted to state agencies and would not require new legislation (see Shale Daily, July 25). He asked his cabinet for implementation plans for those recommendations within 30 days.

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