What’s Next For Pennsylvania’s Impact Fee?

February 15, 2012 | 11:32 AM

By Scott Detrow

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Here’s our lat­est radio story on Pennsylvania’s new impact fee:

Ear­lier this week, Gov­er­nor Tom Cor­bett signed a bill over­haul­ing the state’s nat­ural gas drilling reg­u­la­tions into law.

The mea­sure imposes a $50,000  fee on every well drilling for gas in the Mar­cel­lus Shale for­ma­tion. But as StateIm­pact Pennsylvania’s Scott Detrow reports, the fee is con­di­tional, and won’t go into effect unless coun­ties approve it.

• What’s Next For The Impact Fee?StateIm­pact Pennsylvaina’s Scott Detrow reportsDown­load

State law­mak­ers spent years debat­ing the new reg­u­la­tions, and Repub­li­can Gov­er­nor Tom Corbett’s admin­is­tra­tion worked with top Sen­ate and House Repub­li­cans for months to hash out a final agreement.

And like most leg­is­la­tion borne out of com­pro­mise, nobody seems to like it. “It’s noth­ing more than a sweet­heart deal for multi­bil­lion dol­lar oil and gas indus­try,” said House Demo­c­ra­tic Whip Mike Hanna dur­ing the final floor debate.  “It swin­dles Pennsylvania’s tax­pay­ers, and fails to make huge out-of-state cor­po­ra­tions pay their fair share.”

Add in lan­guage lim­it­ing local gov­ern­ments’ abil­ity to zone and reg­u­late drilling, and most Democ­rats are infu­ri­ated by the law, even though it requires drillers to pub­li­cally report what chem­i­cals they’re using dur­ing hydraulic frac­tur­ing, double’s drillers’ zone of assumed lia­bil­ity, and makes other changes envi­ron­men­tal groups have been push­ing for.

As for the drilling indus­try,  it isn’t too thrilled with it, either. “The Democ­rats in the Gen­eral Assem­bly, they wanted to give us death by fir­ing squad,” said Mike Knapp, who runs the leas­ing con­sult­ing firm Knapp Acqui­si­tions. “The Repub­li­cans, thank­fully, were able to get that sen­tence com­muted to a shot in the foot.”

Knapp said drilling for nat­ural gas in Penn­syl­va­nia has grown more expen­sive, since the state has tight­ened its regulations.

Two years ago, the Depart­ment of Envi­ron­men­tal Pro­tec­tion responded to high-profile methane migra­tion prob­lems by ramp­ing up stan­dards for well cas­ings. “That costs us on aver­age about $30,000 to $50,000 per well. The increased water dis­posal reg­u­la­tions cost us approx­i­mately $80,000 to $100,000 per well. The impact fee itself, we’re going to be look­ing to $40,000 to $50,000 on our estimate.

The Mar­cel­lus Shale Coali­tion has warned energy extrac­tors will be fac­tor­ing the fee’s cost into con­sid­er­a­tions, when they’re decid­ing whether to drill in Penn­syl­va­nia or other states.

The fee is expected to raise nearly $200 mil­lion  this fall, with most of the money going to coun­ties and local gov­ern­ments host­ing wells.

That is, of course, if the coun­ties enact it.

The new levy will be col­lected and admin­is­tered by the state, but Gov­er­nor Cor­bett left the final deci­sion of whether or not to enact a fee to every county. Com­mis­sion­ers in most drilling-heavy coun­ties say they’ll take the money.

But some anti-tax Repub­li­cans are lean­ing toward say­ing “no.” That’s the case in Brad­ford County, which hosts the most wells in the state and would gen­er­ate nearly a quar­ter of this year’s fee revenue.

The county would be pass­ing up a local share of about $10 mil­lion, but Repub­li­can Com­mis­sioner Doug McLinko wor­ries a fee would drive the drillers away. “It isn’t free money,” McLinko argued. “It’s not always free. You have to look at what it’s going to cost you. And when you’re talk­ing about cost in jobs and busi­ness and growth — so it’s not walk­ing away. It’s what it could cost you.”

McLinko’s Demo­c­ra­tic col­league, Mark Smith, said  it’s a mis­take to pass on the fee. He pointed out drilling has brought thou­sands of peo­ple into the county, and the increased pop­u­la­tion is strain­ing the county government’s resources. “Our cor­rec­tional facil­ity is full. That we just expanded five years ago. We’re see­ing impacts in our crim­i­nal jus­tice sys­tem like that,” he said. “Or hav­ing to raise salaries for our county employ­ees in terms of our sheriff’s deputies. Our 911 dis­patch­ing is on the rise by 20 to 30 percent.”

The num­ber of 911 calls is up in nearly every drilling-heavy county. As local gov­ern­ments face more strains, they’re los­ing employ­ees to the drilling indus­try. That’s why Brad­ford needs to raise its salaries.

The board will have until early April to decide whether or not it wants the fee.  The first pay­ments are due Sep­tem­ber 1.