The state Public Utility Commission plays an important role in the new natural gas impact fee law. Chairman Robert Powelson told the house appropriations committee the commission is ideally positioned to take on these new responsibilities outline in Act 13.
It’s up to counties to decide whether to impose the fee, but the PUC will oversee collection and distribution of it, and weigh in on whether local drilling ordinances are reasonable. Powelson says they put together an internal team to look at implementation before the bill even passed.
Powelson says the implementation team already has a draft work plan. Last week, the PUC issued a secretarial letter to all of the affected parties. In the coming weeks, the commission will issue a tentative implementation order addressing some of the procedures related to their new duties under the act.
The commission has posted several new positions related to the act; two attorneys, two new budget analysts and one MIS developer.
There is a 60 day window for counties to decide whether to impose the fee. Municipalities in counties that do not assess the fee have 60 days after that period to petition to have the fee imposed. On September 1st, the natural gas producers will report their well information and the commission will provide an assessment vehicle on the spud fee. Spud refers to the point at which drilling of a natural gas well actually begins.
Powelson says December 1st is the date checks need to go out to counties and municipalities and that deadline is very important to the commission. They are looking at outsourcing the collection and distribution of the fee initially.
Even after years of debate, opinions are mixed on the so-called compromise bill that emerged from a conference committee this week. The Senate voted 31 – 19 on Tuesday, and the House followed suit with a 101 – 90 vote on Wednesday.
The legislation will allow counties to authorize a per-well impact fee (between $40,000 – $60,000 in year one) that will generate needed revenue, according to County Commissioners Association of Pennsylvania government relations manager Lisa Schaefer. “We’ve been talking for quite some time about the broad nature of the impacts that are facing our local communities from Marcellus Shale Drilling,” Schaefer tells us. “Without a direct revenue stream coming back to help offset that, the impact’s been falling back on our local taxpayers.”
The most obvious local impact from Marcellus Shale is the wear and tear on roads and bridges, but the behind-the-scenes effects include greater demand for county services. 60% of an imposed impact fee would stay local; the other 40% would be used for a variety of statewide environmental programs, like hazardous site cleanup or flood control.
Should a county decide not to impose a fee, its municipalities would still have the chance to band together and force their hand under the law.
The bill would also impose stricter new drilling standards and environmental safeguards, but PennFuture President & CEO Jan Jarrett says there are too many waivers and exceptions. “What we need in Pennsylvania are world class drilling standards, and these regulations that are contained in HB 1950 are woefully short of that goal,” Jarrett explained in a telephone interview.
The issue of local zoning was hotly debated on the House floor, as critics balked at standardized rules that would require local governments to allow drilling in all zones – including residential. But State Rep. Garth Everett argued that you’re not going to see a well pad in the middle of a neighborhood. “All that we’re requiring in this legislation is that this industry be regulating just like any other industry with respect to zoning.” He says it’s an industrial use that will be zoned like an industrial use.
Governor Tom Corbett released a statement Wednesday afternoon that said he looks forward to signing the measure into law. “This legislation reaffirms our strong commitment to safe and responsible natural has development here in Pennsylvania.” He says it contains 24 of the legislative recommendations made by his Marcellus Shale Advisory Commission.
A Marcellus Shale bill has cleared the State Senate. The vote and debate held up the Governor’s budget address on Tuesday morning. The chamber approved the conference committee report on HB 1950 by a vote of 31 to 19.
The bill would allow counties to impose a fee on natural gas drillers. 60% of the money raised would go to local governments; the rest would be allocated for a variety of statewide initiatives. The bill also expands environmental regulations on the natural gas industry.
Senator John Wozniak (D-Cambria) voted in favor of it, saying it has taken them 3 years to get this far. He said no matter what tax or impact fee they would place on this natural gas, it’s not the panacea that’s going to balance the budget. He points out that West Virginia, because of competition, recently reduced its severance tax.
Senator John Blake (D-Lackawanna) opposed the Marcellus Shale plan, saying it sells Pennsylvania short. He said at the same time we’re slashing public educating and hurting individuals who depend on our social services safety net, we’re forgoing revenue. He says it’s but a fragment of what Pennsylvanians deserve.
Senator Mike Stack (D-Phila) said hard working Pennsylvanians lose out in the deal. He said they had the opportunity to help the entire state, to close the budget deficit, to help kids go to school, to repair roads, but instead, “gas companies win.”
Severance tax advocates say legislative inaction is adding up to millions of dollars in lost revenue. In fact, the Pennsylvania Budget & Policy Center’s “Drilling Tax Ticker” crossed the $300-million dollar mark late last month. That’s money that Research Director Mike Wood says could be put to good use. “We’ve been making lots of cuts to teachers in our schools, domestic violence shelters have had to close their doors to new people. This is definitely something that could have helped in a time when revenue is pretty hard to come by.”
The ticker is based on an effective tax rate of roughly 6%, whereas the impact fee proposal being hammered out by GOP negotiators in Harrisburg would more likely be in the one or two percent range. “Most states that have either oil or gas have a severance tax. The major producing states all have such a tax,” Wood tells Radio PA. “Pennsylvania is the only one that doesn’t.”
Governor Tom Corbett isn’t fazed when critics point out that Pennsylvania is the largest gas-producing state without a severance tax. He uses the Texas analogy. “They pay a severance tax in Texas, yes they do, but their corporate income tax is considerably lower. So we have to compare apples to apples, not apples to pears.”
While Pennsylvania may not have a severance tax, the governor says they are paying corporate and related taxes. “They’ve paid billions of dollars in taxes, so far, in Pennsylvania directly,” Corbett said on a recent edition of Ask the Governor. “But keep in mind all of their employees, all the companies they purchase goods and services from, they’re all paying taxes also.”
Both Corbett and Senate President Pro Tem Joe Scarnati (R-Jefferson) have expressed a desire to finalize impact fee discussions before next week’s budget address.
The House and Senate each passed their own versions of Marcellus Shale impact legislation prior to the holiday break. But Governor Tom Corbett says staff-level negotiations didn’t take a vacation. “I think there’s been a great deal of movement by everybody, and I believe we’re going to get a bill done this session,” Corbett said on Radio PA’s Ask the Governor program. “Particularly I would like to see a bill done before the budget address of February the 7th.”
But some 20 environmental groups rallied in the capitol rotunda, this week, urging lawmakers to scrap both bills. Among their biggest concerns are provisions that would limit the ability of local governments to regulate natural gas drilling. “How can [the state] say that they have more expertise than a local community does over their environment, over their health, over what their people want,” says PennEnvironment’s Erika Staaf. “I’m some areas the people might want a ban.”
But Governor Corbett says uniform zoning rules are necessary to encourage investment and create jobs. “Businesses, if there are going to invest in Pennsylvania – and they have been investing billions of dollars – have to know that there is consistency in the application of the zoning rules across the state.” He says this is not a case of state government bending over backwards for the industry.
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