Conference Committee Approves Impact Fee, Setting Table For Final Votes

February 6, 2012 | 9:53 PM

By Scott Detrow

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This time tomor­row, leg­is­la­tion over­haul­ing Pennsylvania’s nat­ural gas drilling reg­u­la­tions and impos­ing a per-well impact fee may be headed to Gov­er­nor Corbett’s desk.

A joint House-Senate con­fer­ence com­mit­tee approved a 174-page bill tonight. Sen­ate rules allow a vote on the plan first-thing tomor­row morn­ing. The House requires a 24-hour wait on all votes, which means the cham­ber can’t con­sider the bill until around 8 PM on Tuesday.

The leg­is­la­tion is the result of months of nego­ti­a­tions between House and Sen­ate Repub­li­can lead­ers and the Cor­bett Admin­is­tra­tion. It bridges the gap between the impact fees the two cham­bers approved in Decem­ber, cre­at­ing a 15-year fee that keeps 60 per­cent of rev­enue at the local level, and dis­trib­utes the rest to var­i­ous state agencies.

The per-well would be adjusted based on nat­ural gas prices. The ini­tial fee ranges from $40,000 to $60,000-per well. In a well’s fif­teenth year of pro­duc­tion, drillers would pay between $5,000 and $10,000. The bill’s authors esti­mate it would gen­er­ate around $200 mil­lion this year, in addi­tion to retroac­tive 2011 payments.

One major change from pre­vi­ous ver­sions of the bill: the leg­is­la­tion imposes a fee on all drilled wells, not just pro­duc­ing wells. That cre­ates a much larger uni­verse of wells to col­lect money from.

Sen­ate Pres­i­dent Joe Scar­nati first intro­duced an impact fee in April 2011. Gov­er­nor Cor­bett endorsed the con­cept in Octo­ber, after his Mar­cel­lus Shale Advi­sory Com­mis­sion spent the spring and sum­mer delib­er­at­ing the concept.

Still, Democ­rats on the panel com­plained the final prod­uct was the result of pri­vate meet­ings they hadn’t been invited to. “House Democ­rats are see­ing [the final bill] for the first time this evening,” said Demo­c­ra­tic Whip Mike Hanna, who rep­re­sented the cau­cus on the com­mit­tee. “We’ve basi­cally been left in the dark this entire process.”

Sev­eral Repub­li­cans pointed out Hanna was famil­iar enough with the leg­is­la­tion to ask nearly a half hours’ worth of detailed ques­tions dur­ing the com­mit­tee meet­ing, and pro­duce a writ­ten state­ment explain­ing his oppo­si­tion to the measure.

“We’ve been work­ing on this for over two years,” said Scar­nati. “If there isn’t any­body that didn’t know what was going to be…on the table today, they weren’t read­ing the news­pa­pers over the weekend.”

The leg­is­la­tion main­tains restric­tions on local gov­ern­ments’ abil­ity to zone and reg­u­late drilling. It cre­ates statewide stan­dards for Mar­cel­lus Shale wells, estab­lish­ing a min­i­mum dis­tance of 500 feet between well pads and build­ings. Wells would need to be 300 feet from bod­ies of water, and 1,000 feet from any “water sup­ply extrac­tion point.”

Munic­i­pal­i­ties would not be allowed to ban drilling from any type of zone, except for dense res­i­den­tial areas where a well could not be built more than 500 feet from a home.

Munic­i­pal­i­ties that pass ordi­nances or zon­ing require­ments stricter than the statewide stan­dards would lose their impact fee rev­enue. Scar­nati defended the restric­tions, which have drawn oppo­si­tion from local offi­cials. “You can’t spot zone,” he said. “You can’t treat this indus­try any dif­fer­ent than you would, say, a pow­der met­als man­u­fac­turer with all the require­ments.” The drilling indus­try has pushed hard for the statewide stan­dard­iza­tion of local drilling reg­u­la­tions, as has Gov­er­nor Corbett.

The Penn­syl­va­nia State Asso­ci­a­tion of Town­ship Super­vi­sors is sup­port­ing the leg­is­la­tion, as is the County Com­mis­sion­ers Asso­ci­a­tion of Pennsylvania.

Other notable aspects of the legislation:

• The bill autho­rizes the annual trans­fer of mil­lions of dol­lars from the Oil and Gas Lease Fund to the Envi­ron­men­tal Stew­ard­ship Fund and Haz­ardous Sites Cleanup Fund.
• The Depart­ment of Envi­ron­men­tal Pro­tec­tion can “enter into con­tracts” with pri­vate well con­trol teams, who would be given lim­ited immu­nity from civil lawsuits.
• Com­pa­nies would be required to sub­mit reports to DEP detail­ing chem­i­cals used dur­ing the hydraulic frac­tur­ing process. This infor­ma­tion would be pub­lished on FracFocus.org, which is becom­ing a national clear­ing­house for frack­ing dis­clo­sure information.
• Civil penal­ties against drillers who vio­late reg­u­la­tions would be increased to $75,000.
• The bill sets new bond lev­els for drillers, based on the length of well bores and the amount of wells each com­pany operates.

(All of these pro­vi­sions were included in ear­lier ver­sions of the impact fee.)

All four Repub­li­cans on the con­fer­ence com­mit­tee sup­ported the bill, while both Democ­rats opposed it. Sen­ate Demo­c­rat John Yudichak said he voted no because of the legislation’s uncer­tainty. The bill allows coun­ties to decide whether or not they’ll enact a fee. Yudichak wor­ries rev­enue will drop, if too many coun­ties opt out of the levy. “This con­fer­ence report, this bill, rep­re­sents the art of maybe,” he explained. “Maybe a fee is imposed by a county. Maybe we have a job cre­ation pol­icy. Maybe we have envi­ron­men­tal reg­u­la­tions that pro­tect our land, air and water.”

Scar­nati said he expects a Sen­ate vote before Gov­er­nor Corbett’s 11:30 AM bud­get address.