After years of deliberation on the issue, Pennsylvania legislators passed a bill overhauling the state’s natural gas drilling laws on February 8, 2012.
While most of the legislation has already gone into effect, Commonwealth Court has thrown out a section restricting local governments’ ability to zone and regulate natural gas drilling. The Corbett Administration has appealed the decision to the Supreme Court of Pennsylvania.
The law places an impact fee on every well drilling for gas in the Marcellus Shale formation. The levy will change from year to year based on natural gas prices and the Consumer Price Index, but in 2012, drillers paid $45,000 per-well. (Smaller, vertical wells will paid $9,000.)
The impact fee brought in $204 million to Pennsylvania for 2011, and $202 million during 2012. There was less money in 2012 because the fees are tied to the price of natural gas, which declined by a third.
Sixty percent of the revenue stays at the local level, going to counties and municipalities hosting wells. The rest goes to various state agencies involved in regulating drilling and to the Marcellus Legacy Fund– which gets spread out around the state for environmental and infrastructure projects.
These are the top five counties receiving the most impact fee money in 2012 :
- Bradford $6.9 million
- Washington $4.6 million
- Tioga $4.3 million
- Lycoming $4.3 million
- Susquehanna $4.1 million
Restricting Local Power
In addition to setting a fee, the legislation restricts municipal zoning of drilling operations. Townships and municipalities are required to allow drill rigs in all types of zones, except for densely-populated residential areas. It sets state standards for the minimum distance between wells and streams, schools, buildings and water sources. If a local government passes ordinances and regulations that go beyond the new state standards, the Public Utility Commission will have the power to bar the municipality from receiving any impact fee money.
On July 26, Commonwealth Court declared this section of the law null and void, arguing it violates local governments’ constitutional due process rights. The Corbett Administration has appealed this decision to the state Supreme Court, and asked the panel for an expedited ruling.
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.
- Drillers’ zone of presumed liability will expand from 1,000 to 2,500 feet. That means if a water source within this area is contaminated, the assumption will be that drilling messed it up.
- 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.
(For more details about what’s in the new law, read our annotated version of the impact fee.)