Pennsylvania

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What’s Next For Pennsylvania’s Impact Fee?

Scott Detrow / StateImpact Pennsylvania

Bradford County Commissioner Doug McLinko says he won't vote for a fee

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.

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.

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