What The New Impact Fee Law, Act 13, 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.

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 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. Sixty 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.

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 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.)