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Pennsylvania's Impact Fee to Stand; No Danger of Act 13 Challenge Expected

Pennsylvania's impact fee, which charges a flat rate for all unconventional wells drilled annually, will stand and not be part of a challenge to Act 13 on remand from the Pennsylvania Supreme Court, according to an order issued last week.

In December, the state’s high court struck down parts of Act 13, a sweeping piece of legislation that updated the state's oil and gas laws and imposed the impact fee, returning to municipalities their right to change or enforce zoning laws (see Shale Daily, Dec. 20, 2013). That provision, though, was so closely intertwined with other setback and environmental regulations that the court sent some parts of the law to the state's Commonwealth Court for further review and additional rulings.

The impact fee, which is allocated to local communities and state agencies, has generated an estimated $406 million since it was established in 2012 (see Shale Daily, Feb. 15, 2012). But renewed calls for a state severance tax (see Shale Daily, Jan. 28) and the uncertainty surrounding the high court's ruling had left many to wonder if it would be challenged on remand in a lower court.

Attorney John Smith of Smith Butz LLC, who represents two of the six townships that brought the Act 13 challenge, said the impact fee was never part of the case and the plaintiffs never questioned it.

"When we went to discuss what would be litigated on remand, the court asked us if there [were] any issues or parts of the statute that we want[ed] it to look at or that should also be thrown out because of what the supreme court did," Smith told NGI's Shale Daily. "The impact fee was never part of the case from Day One."

Nine attorneys from the Pennsylvania Department of Environmental Protection, the Public Utilities Commission (PUC), the Attorney General's Office and the plaintiff townships attended a meeting on Monday and none requested that the impact fee be severed from Act 13. Smith said all parties felt it could stand separate of the high court's ruling, and both sides agreed to leave it out of any further arguments.

The state supreme court's decision has stoked a degree of uncertainty for the industry as the state's regulatory role was partially diminished (see Shale Daily, Dec. 27, 2013). Republican Gov. Tom Corbett's administration in January requested that the justices reconsider their decision, but they rejected that request in one sentence last month (see Shale Daily, Feb. 24, 2013). Since then, three of the state's oil and gas trade groups have petitioned the Commonwealth Court to intervene (see Shale Daily, March 6, 2013).

An order issued last week shows that the Commonwealth Court will decide whether private water well owners must be notified with public water authorities in the event of a hazardous spill.

The lower court will also hear a challenge that would allow doctors to disclose the kind of chemicals used in drilling operations. A ruling also is expected on the regulatory role of the PUC and a part of the law that allows energy companies to seize property to transport or store oil and gas. 

Both parties are required to submit their briefs by April 21, with oral arguments scheduled May 14 in Philadelphia.

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