Pa. GOP plan for drilling fee solidifies

Pennsylvania Senate Republicans’ Marcellus Shale drilling impact fee has finally moved from a hypothetical to a reality.

Well–sort of. The bill itself won’t be introduced until next week. But Senate President Pro Tem Joe Scarnati has unveiled the outlines of his plan, which would assess a $10,000 annual base fee on every Marcellus Shale well in Pennsylvania. The plan includes multipliers based on production and gas prices, which could increase the levy to more than $20,000 or $30,000 for some wells.

Scarnati’s proposal would send more than half of the revenue to counties and townships where drilling is taking place. The rest would go to environmental conservation districts, and to fund environmental cleanup and infrastructure repair projects. Of the money designated for local governments, 36 percent would head to counties hosting Marcellus wells; 37 percent would go to municipalities where drilling is taking place; and 27 percent would be designated for “municipalities having no producing sites but located in counties with producing unconventional gas wells.”

“This is not a giveaway,” said Scarnati. “Even the conservative numbers that we use are well above the estimated severance tax from last year’s (Senate Republican severance tax) model.” A spreadsheet distributed by Scarnati’s office estimates $121 million in 2011 and retroactive 2010 collections, and $103 in 2012 revenue.

Scarnati is hoping for an early June Senate vote, and passage of the law along with this year’s state budget.

“I cannot see how we can get the budget process done, with all the cuts that are occurring on so many lines, without addressing an impact fee for this industry,” he said. “It’s not going to solve our budget problem. Not by any sense. But the political pressures that are on legislators because of the cuts starts connecting dots.”

Under Scarnati’s proposal, the Public Utility Commission would collect and distribute the fee money. That, in his mind, works around Gov. Tom Corbett’s demand that fee revenue stay out of Pennsylvania’s General Fund.

At first glance, Jan Jarrett of PennFuture is not very impressed with Scarnati’s plan. “We need a robust and broad-based tax on the drillers that will protect the local communities, provide funding for environmental cleanup and protection, and benefit all Pennsylvanians for the loss of our natural resources. Sen. Scarnati’s plan, unfortunately, fails to provide vitally necessary environmental protection funding, and does little to benefit the average Pennsylvania taxpayer,” she said in an e-mailed statement.

Anticipating criticism, Scarnati said hopes for a broader tax are unrealistic, given the fact Corbett has promised to veto any tax increase. “Those who have been clamoring for a severance tax or impact fee …they should be very supportive in fact that we are putting dollars into real cleanup programs. “

Katherine Klaber, the president and executive director of the Marcellus Shale Coalition, issued the following statement on the proposal: “Our industry understands that, while there are tremendous financial opportunities in Marcellus Shale development, there also can be impacts felt by our host communities. Policy decisions made at the state and local levels of government most certainly have an effect on job creation and the investment of capital needed to develop and maximize the benefits of clean-burning natural gas from the Marcellus.

“Pennsylvania has the opportunity to create a sustained and highly competitive environment for growth of this productive industry, with all of the associated benefits for its residents,” the statement continues. “In order to meet this goal together, any local impact fee on Marcellus production must be clear, straightforward, and competitive.

“We are open to discussing with the governor’s Marcellus Shale Advisory Commission, and all legislators, proposals that focus on strengthening our partnership with municipal governments, while providing funds to local communities,” it concludes.