Pa. towns savor drilling impact-fee checks

Originally published Oct. 26, 2012.

CARMICHAELS, Pa. - William Groves, chairman of the Cumberland Township board of supervisors, was poring over the municipal budget last week, confronting a challenge that most local officials would envy.

Groves was trying to figure out what this Greene County community in Southwestern Pennsylvania would do with a $1 million windfall from the Marcellus Shale impact fee. Of all the towns affected by natural-gas production, Cumberland Township got the largest share from the state's new drilling assessment.

"It is certainly a pleasant challenge," he said.

The $1,039,586.78 check that the township received represents a 45 percent boost to its $2.3 million annual budget.

There is no shortage of need in this rural township of 6,600 residents, where Marcellus producers have drilled 83 wells since the shale boom began in 2008. The hilly township bordered by the Monongahela River has only 20 municipal employees, half of them police officers. It maintains 68 miles of roads, and funds three volunteer fire companies.

Groves favors buying a tractor and a new pavilion for 30-acre Wana B Park, so named because the donor of the land said the property wanted to be a park.

The supervisors held a workshop Tuesday on how to cope with their good fortune. "We knew we were getting a large bit of money, but not this much," said Groves, 70.

Local officials across the state are confronting the same question: how to spend their share of the $204 million generated by the impact fee, which was enacted earlier this year.

For some jurisdictions, the fee income is substantial. Bradford County on the state's northern border, home to some of the state's most intense drilling activity, will receive $8.4 million, the largest share for a county.

The Republican-dominated legislature opted for an impact fee this year despite criticism that it would generate only a fraction of the revenue of a production tax. Gov. Corbett, who favors keeping costs on drillers low to attract more production to Pennsylvania, favored the impact fee, which assesses an annual flat charge of $10,000 or $50,000 per well, depending upon its size.

Under a complicated formula for allocating the revenue, every county will receive a share through the state's Marcellus Legacy Fund.

Counties in Southeastern Pennsylvania fared well, getting shares ranging from $423,255 in Chester County to $1.29 million in Philadelphia, despite complaints from drilling areas that no production is taking place near Philadelphia.

For Philadelphia, the $1.29 million in revenue represents less than one-tenth of a percent of the city's $3.6 billion budget, or about 84 cents per resident. In parts of the state without drilling, the impact-fee law requires that the money be used for environmental purposes.

In shale-drilling areas, counties will receive much more money per capita and have more latitude on spending it, including water and wastewater projects, road maintenance, law enforcement, social-service delivery, emergency preparedness, affordable housing and tax reductions.

Greene County officials are pondering ways to put $3.1 million in new money to work. "We might use the funds to bring some of our buildings up to code," said Archie Trader, a county supervisor, who said he favors repairing the roof on the 162-year-old courthouse in Waynesburg, estimated to cost about $700,000.

In Cumberland Township, Groves said the drilling has caused some hardship - an upsurge in traffic, and higher rents caused by an influx of Marcellus workers.

"There are a few things you have to tolerate when the drilling is going on," he said.

But he said the population in the coal-mining area is accustomed to natural-resource extraction and mostly tolerates the activity. He also praised the drillers active in the township - Atlas Energy, Chevron and Energy Corp. of America - for rebuilding 12 miles of roads.

Groves said the township supervisors are trying to be conservative with the money inasmuch as it's unclear how much impact-fee revenue it can expect in future years.

"We're trying to think this through and do the cautious thing so we don't get ourselves into something we shouldn't," he said.

Pennsylvania's impact fee on Marcellus Shale gas producers generated $204 million in its first year. The funds are allocated as follows:

About $23 million is earmarked for state agencies to offset the statewide impact of drilling.

60 percent of the remaining funds after earmarks goes to counties and municipalities.

40 percent of the remaining funds after earmarks goes to statewide initiatives.

The 10 counties receiving the most funds (in millions) this year are:

Bradford $8.43

Tioga $4.79

Washington $4.43

Lycoming $4.03

Susquehanna $3.94

Greene $3.13

Westmoreland $1.72

Fayette $1.45

Philadelphia $1.29

Clearfield $1.15

SOURCE: Pennsylvania Public Utility CommissionEndText