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Drilling Impact Fee Clears Pennsylvania House, 107-76

After three days of deliberations, the Pennsylvania House of Representatives passed an impact fee on oil and gas drilling in the Marcellus Shale by a 107-76 vote.

Although a finalized version of House Bill 1950 was not immediately available, it contains what essentially is a 1% tax which gives counties the power to levy an impact fee of $40,000 per well in the first year of production, $30,000 for the second year, $20,000 for the third year and $10,000 for the fourth through 10th years of production.

County and local governments would also be the prime beneficiaries of 75% of the revenues collected by the impact fee. Of that 75%, 36% would be retained by the counties, 37% distributed to municipalities that host drilling operations and 27% given to all municipalities. The remaining 25% of the fee revenue would go to the state government, which is required to spend most of it (70%) on infrastructure improvements to address the impacts of shale gas drilling.

"Under this proposal, there is nothing mandatory," House Majority Leader Mike Turzai (R-Pittsburgh) said before the final vote. "This is enabling legislation with respect to the counties that have the business opportunities and the impacts in their communities. We are enabling them to be able to use those dollars for needed service in response to those impacts."

During the final run up to the vote, a parade of Democrats derided HB1950 on the grounds that it didn't go far enough to regulate the industry and wasn't high enough of a tax.

"It's a woefully inadequate tax," said House Minority Leader Frank Dermody (D-Cheswick). "The only reason you would want to vote for this bill is if you want to let some of the wealthiest corporations in the world off the hook so they don't have to pay their fair share. It may be the lowest tax in the country on oil and gas drillers."

The House must now reconcile HB1950 with another bill passed Wednesday by the state Senate (see Shale Daily, Nov. 17). Senate Bill 1100 calls for imposing a tax rate of approximately 3% on natural gas production, retroactive to 2010.

Under SB1100, a sliding fee of $50,000 per well would be assessed on unconventional wells in the first year of production, $40,000 in the second year; $30,000 in the third year, $20,000 in the fourth through 10th years, and $10,000 through the 20th year. SB1100 also calls for an additional fee if natural gas prices exceed $5/Mcf.

The House passed one amendment to HB1950 on Thursday. According to the roll call, legislators tacked on two amendments to the bill on Monday, another 16 on Tuesday and nine on Wednesday before a parliamentary maneuver was used to cut off debate.

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