Shale Daily / NGI All News Access

Pennsylvania Nearing Finish Line for Impact Fee

Pennsylvania state lawmakers have apparently reached a deal for the impact fee they hope to impose on natural gas drilling by splitting the difference between two competing proposals.

The plan would create a county-level fee on all unconventional gas wells and set tiered rates based on gas prices, according to a memo sent to Democrats in the Pennsylvania House of Representatives.

The state Senate voted Monday afternoon to move the existing legislation -- HB 1950 -- to a conference committee to approve the new language. That committee must approve the new, negotiated changes before the bill can be returned to lawmakers for a final vote.

The proposal would raise between $190,000 and $355,000 per well over 15 years, depending on average annual price of gas and adjustments based on the consumer price index. The original Senate bill would have raised $360,000 per well over 20 years, while the original House proposal would have raised $160,000 per well over 10 years (see Shale Daily, Nov. 18, 2011; Nov. 17, 2011).

That fee structure only covers horizontal unconventional wells. The fee on vertical unconventional gas wells would be no more than 25% of the horizontal well fee and would last for 10 years.

The Pennsylvania Public Utility Commission (PUC) would collect the fee.

While the Senate originally wanted a uniform state-level fee and the House wanted an optional county-level fee, the new proposal would allow counties to opt-in. If a county chooses not to participate, a majority of municipalities within the county could vote to overrule that decision. A county could later opt in to the program, but would not get to benefit from the fee until it did.

The proposal would direct 40% of the revenue collected from the fee to statewide environment and energy programs including the PUC, the Pennsylvania Department of Environmental Protection (DEP), the Pennsylvania Fish and Boat Commission and the State Fire Commissioner. The remaining 60% would go to counties and municipalities that host drilling. The original Senate proposal kept 55% of the revenue at the local level, while the House kept 75% at the local level.

The program would also dedicate revenue from the fee for economic development projects, such as attracting an ethane cracker or a similar energy-related complex to locate in Pennsylvania.

That structure earned the approval of the County Commissioners Association of Pennsylvania (CCAP) on Monday. "The bill includes provisions counties have sought, including meaningful revenues and a meaningful local share, a workable levy and administrative mechanism, the distribution formula we have sought, allowable uses that meet the broad and divergent needs of impacted counties and their municipalities, additional funding to counties from state shares to provide for bridge repair and replacement and for greenways, and allocation of funding proceeds statewide to conservation districts and some environmental programs," according to the CCAP.

The newest proposal would prohibit local governments from passing ordinances that regulate issues already handled by the DEP or that regulate natural gas development more stringently than other industries. Operators would be able to have the PUC review those ordinances before enactment.

Restricting local control is becoming increasingly unpopular in Pennsylvania (see Shale Daily, Feb. 3).

The new proposal maintains the environmental provisions of earlier versions.

Lawmakers want to pass a bill before Gov. Tom Corbett releases his annual budget on Tuesday.

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