Pennsylvania

Energy. Environment. Economy.

Topics

The new rules will affect both the conventional industry, which has been drilling in Pennsylvania since the 19th century and the newer, deeper wells of the Marcellus Shale industry.

The oil and gas law of the land: Act 13

Background

cabot_drill_site12

Lindsay Lazarski/WHYY

Act 13 is a major overhaul of Pennsylvania’s oil and gas law.

After years of deliberation on the issue, legislators passed the bill on February 8, 2012.

The Zoning Battle

Over the past three years, portions of Act 13 were caught up in an ongoing legal battle.

The case has pitted a number of local governments against the Corbett administration. The main issue centers on who gets to decide how to zone oil and development.

In July 2012, the Commonwealth Court threw out a section of the law restricting local governments’ ability to zone and regulate natural gas drilling. The Corbett administration appealed the decision to the Supreme Court of Pennsylvania. In a 4-2 decision in December 2013, the State Supreme Court agreed with the lower court, and held that portions of the law restricting local zoning were unconstitutional.

One section of the law that was struck down called for statewide rules on oil and gas to preempt local zoning rules. Another section required municipalities to allow oil and gas development in all zoning areas.

In a plurality opinion, written by Chief Justice Ronald Castille, the court determined both those provisions violate the Environmental Rights Amendment of the state constitution which guarantees Pennsylvanians the right to, “clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment.”

Castille cited the state’s history with coal and timber as lessons which lead to the amendment.

“Pennsylvania has a notable history of what appears, retrospectively, to have been a shortsighted exploitation of its bounteous environment, affecting its minerals, its water, its air, its flora and fauna and its people,” he wrote.

But the high court’s ruling didn’t close the case for good. In its December 2013 decision, the Supreme Court sent some provisions of the law back down to the lower Commonwealth Court.

Despite the legal battle, most of the law remained intact. The Commonwealth Court was only examining a narrow set of issues. In a July 2014 ruling, the Commonwealth Court threw out most of the remaining challenges to the law, but it upheld the notion that local governments– not the state– have the authority to zone oil and gas development.

The state Public Utility Commission appealed that decision in August 2014, arguing it maintains the right to review local zoning ordinances. The Supreme Court could hear oral arguments in the case as early as this fall.

The Fee

Act 13 places a so-called “impact fee” on every well drilling for gas in the Marcellus Shale formation. The levy changes from year to year based on natural gas prices and the Consumer Price Index.So far, the impact fees have brought in $853.5 million to Pennsylvania:

  • 2011: $204 million
  • 2012: $202 million
  • 2013: $225 million
  • 2014: $223.5 million

The amounts change annually based on the number of wells drilled and the price of natural gas.

Sixty percent of the impact fee 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 2014 :

  • Washington $6.5 million
  • Bradford $6.4 million
  • Susquehanna $6.1 million
  • Lycoming $4.8 million
  • Greene $4.5 million

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.)

Latest Posts

States should put fracking money in trust funds, says new report

States at the center of the recent oil and gas boom should prepare for the inevitable bust and put drilling revenues into permanent trust funds, says a new report from the Metropolitan Policy Program at Brookings. The researchers singled out Pennsylvania and argue it should enact a severance tax on gas production. Drillers currently pay [...]

Pa. Supreme Court weighs major gas drilling laws

Lindsay Lazarski/WHYY Test technicians Charles Young and Ethan Eckard use joysticks and touch screens to operate a Schramm drilling rig. Decisions on two major gas drilling cases are now in the hands of the Pennsylvania Supreme Court. Oral arguments were heard Wednesday in Philadelphia. One case includes unresolved issues from the 2013 Supreme Court decision [...]

Gas impact fees expected to drop 17 percent this year

The year 2016 is already shaping up to be a bad one for Pennsylvania’s gas industry, and it’s going to hurt state and local governments too. Impact fees paid by drillers are projected to bring in the lowest amount ever — $185.5 million — according to a new analysis by the state’s Independent Fiscal Office. It’s [...]

Wolf proposes 6.5 percent tax on Marcellus Shale

Governor Wolf wants the state’s natural gas drillers to pay a 6.5 percent tax on Marcellus Shale production, which he estimates will bring in $217.8 million dollars for fiscal year 2016/2017 to the general fund. It’s a bold move for a governor who failed to get anywhere last year with the lower 5 percent extraction [...]

Ahead of Wolf’s budget plan, Republicans discuss Marcellus tax bills

A day before Governor Tom Wolf is expected to unveil another attempt at taxing Marcellus Shale drillers, House Republicans were discussing their own proposals. The House Environmental Resources and Energy Committee held an informational meeting Monday to look at two Republican-backed severance tax bills. Rep. John Maher (R- Allegheny) chairs the committee. He says he [...]

Low gas price cuts impact-fee revenue for Pa. counties and municipalities

Pennsylvania’s local authorities will lose millions of dollars in fees from the natural gas industry this year because of lower gas prices in 2015. The Public Utility Commission announced on Jan. 30 that mostly because of the sharp fall in gas prices, it would be reducing the amounts paid to municipalities and counties from impact [...]

Lack of data on fracking spills leaves researchers in the dark on water contamination

A recently published peer-review of the EPA’s fracking study criticized the agency for reaching conclusions in their draft report without adequately explaining the lack of data and research available, including information related to wastewater, chemical and fuel spills resulting from oil and gas production. The EPA’s Science Advisory Board, an independent group of scientists tasked [...]

State Auditor General to investigate where drilling impact money is going

State Auditor General Eugene DePasquale (D) plans to investigate how local governments are spending the millions of dollars they’ve received from gas drilling impact fees. The fees have brought in more than $854 million to Pennsylvania since 2012. The majority of that money gets sent back out to local governments. But so far, $33.1 million [...]

Court backing for zoning change could spur wider gas development, critics say

Reid Frazier Nichole Mazurek, of Middlesex Township, at an anti-fracking protest with her three children, Samantha, 8, Ian, 3, and Alyson 6. Environmentalists attacked a county court ruling that backs one township’s change of zoning rules to promote natural gas development, saying the decision is likely to encourage other municipalities in Pennsylvania to open up [...]

Poll finds voters still want new tax on gas drillers

The latest public opinion poll from Franklin and Marshall College shows solid public support for a new tax on the state’s natural gas drillers. But the levy remains one of the hot topics that continue to stall state budget negotiations in Harrisburg. As the budget impasse drags on into its fourth month, F&M pollster Terry Madonna [...]

About StateImpact

StateImpact seeks to inform and engage local communities with broadcast and online news focused on how state government decisions affect your lives.
Learn More »

Economy
Education