Pennsylvania General Assembly to Consider Shale Gas “Impact Fee” Legislation

According to a recent article in the Pittsburgh Post-Gazette, Governor Tom Corbett and top legislative leaders have been meeting to develop and finalize details on a new “impact fee” that will be assessed on drilling operations. The crux of the negotiations will be over determining which agency will collect the fees and what role local governments may play in regulating the industry’s activities. 

Governor Corbett suggested that significant progress was being made to resolve the differences between two competing proposals that were approved by the State House (House Bill 1950) and Senate (Senate Bill 1100). The House-approved legislation mirrored a proposal introduced by Governor Corbett last October that would impose a maximum $40,000 per well impact fee, which would then eventually be reduced to $10,000 a year during a 10-year period. Using estimates provided by the Governor's office, the impact fee could generate up to $120 million in the first year and up to $200 million within six years with roughly 75 percent of the generated funds going to local municipalities. Senate Bill 1100 would have an upfront maximum impact fee of $50,000 per well that would be depreciated over a 20-year period, for a total of $360,000 per well.Fees would be collected by the Public Utility Commission and first $8 million in revenue is allocated for the Fish and Boat Commission, the State Fire Commission, and county conservation districts. The remaining revenue is split 55 percent to local governments in counties with producing wells and 45 percent for state transportation needs, water and sewer infrastructure, and hazardous waste clean-up. The existing disagreements on the competing bills appear to be over the best uses of the collected fees assessed on natural gas drilling and the distribution methodology that would be implemented to funnel money to local communities. 

Many local community and environmental groups oppose the legislation because of concerns that both bills would supersede local zoning laws over "permitted uses" for drilling activities. Pennsylvania's Attorney General would be given authority through a petition process to determine if a local ordinance is "reasonable" and it would also be given authority to bring suits against municipalities over certain ordinances or even bar some offending localities from receiving funds generated from the impact fees. These advocacy organizations argue that communities are being stripped of important rights to decide how and where local development should proceed next to schools, residential areas, and industrial zones. Industry groups contend that they need standardized regulations in place to bring and extract resources to the marketplace without facing a patchwork of regulations designed to purposefully frustrate their operations.