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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

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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 Legal Battle

Over the past four years portions of Act 13 were caught up in an intense legal battle.

The case pitted a number of local governments and environmental groups against former Republican Governor Tom Corbett’s  administration.

The main issue centered on who gets to decide how to zone oil and development.

In a 4-2 decision in December 2013, the State Supreme Court ruled 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, “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.

Despite this ruling, much the law remained intact, and questions over a few other controversial provisions were sent back down to the lower Commonwealth Court, which largely sided with the law’s supporters in a 2014 ruling. The case was appealed back up to the state Supreme Court again. In September 2016, the high court ultimately sided with the groups challenging the law.

The Impact 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 more than a billion dollars to Pennsylvania.

  • 2011: $204 million
  • 2012: $202 million
  • 2013: $225 million
  • 2014: $223.5 million
  • 2015: $187.7 million
  • 2016: $173.3 million

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.

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 expanded 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.)

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