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Pennsylvania Governments Split on Impact Fee

A pair of votes last week highlighted the struggle Pennsylvania's local governments are having with a new regulatory package of shale development.

The Allegheny County Council unanimously voted last Tuesday to collect an impact fee included in the package called Pennsylvania Act 13, allowing it to claim a share of revenues collected from natural gas drilling, while the City Council of Pittsburgh, which is in the center of Allegheny County, unanimously voted on the same day to condemn the law.

While some members of the Allegheny County Council suggested the fee kept the state competitive in the race for investment, few endorsed Act 13 wholeheartedly. "It's not enough. It's a token amount," Councilman Matt Drozd told the Pittsburgh Tribune Review following the vote. With only nine wells drilled to date, Allegheny County stands to receive less than $100,000 this year by opting-in to the program.

Act 13 gives Pennsylvania counties the choice to collect an annual per-well fee from operators. The fee is set annually based on the price of gas and declines over 15 years but is set at $50,000 for all unconventional horizontal gas wells drilled through 2011. The revenue from the program is split between state and local governments, with the local share split between counties and the municipalities in those counties.

So far, at least 23 counties have accepted the fee, accounting for 3,387 of the 4,982 eligible wells in the first year, around 68%. The remaining hold-outs include three of the 10 most active counties in the state -- Bradford, Fayette and Armstrong. Any county that doesn't sign up for the program by April 16 can be overruled by a majority of its municipalities, but some municipalities are increasingly skeptical of the law, particularly the provisions that restrict local zoning (see NGI, Feb. 13).

The city of Pittsburgh is throwing its weight behind the municipalities. The city council voted unanimously last Tuesday to support seven municipalities that recently sued the state over Act 13, claiming the law violates the state and U.S. Constitution by superseding local authority over drilling (related story). Two of the seven signing onto the suit are among the 130 municipalities in Allegheny County, whose 745 square miles spreads out over the suburbs and the ex-urbs of Pittsburgh.

In a Will of Council, the seven members of the Pittsburgh city council said Act 13 "infringes upon the rights of affected local governments throughout the Commonwealth to protect the health, safety and welfare of its citizens, as the city of Pittsburgh did by enacting a ban on drilling" (see NGI, Nov. 22, 2010).

The city also said the state passed the law without "meaningful transparent discussions" between the state and local governments, and the industry "unduly influenced state elected officials enabling them to provide and legislate for the path of lease resistance to the riches that lie beneath the Commonwealth."

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