What The New Impact Fee Law Means For Pennsylvania

Background

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After years of delib­er­a­tion on the issue, Penn­syl­va­nia leg­is­la­tors passed a bill over­haul­ing the state’s nat­ural gas drilling laws on Feb­ru­ary 8, 2012.

The Fee

The leg­is­la­tion 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 will pay $50,000 per-well. (Smaller, ver­ti­cal wells will pay $10,000 this year.)

The bill’s authors esti­mate the fee will gen­er­ate around $180 mil­lion, when pay­ments are turned in on Sep­tem­ber 1. 60 per­cent of the rev­enue will stay at the local level, going to coun­ties and munic­i­pal­i­ties host­ing wells. The rest will go to var­i­ous state agencies.

While the fee is admin­is­tered and col­lected on the state level, coun­ties will decide whether or not to enact it. County com­mis­sion­ers have until mid-April to enact a fee. If any county chooses not to col­lect the money, its munic­i­pal­i­ties will have a 60 day win­dow to over­ride the deci­sion. When more than half of the county’s town­ships and bor­oughs pass a res­o­lu­tion call­ing for a fee, the levy will auto­mat­i­cally be adopted.

How much fee rev­enue will each county receive this year? Click on our map to find out.

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.

Other Changes

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.)