Pa. House approves fee on Marcellus Shale gas

MARCELLUS SHALE
A worker cleans and lubricates the head of the machine, after the stimulation hydraulic fracturing of one segment of the well is finished, at Southwestern Energy Co.'s natural gas production site at the Marcellus Shale formation in Camptown, Pennsylvania, U.S., on Wednesday, Oct. 19, 2011. The Marcellus Shale, located in the U.S. Northeast, contains natural gas, which is obtained through hydraulic fracturing, a technique in which millions of gallons of water, sand and chemicals are pumped underground to break apart the rock. Photographer: Julia Schmalz/Bloomberg

HARRISBURG - Pennsylvania is a signature away from imposing a fee on natural gas extraction in the Marcellus Shale.

After three years of debate and false starts, the House voted, 101-90, Wednesday to approve a compromise plan for a "local impact fee" on natural gas drillers. With the Senate's approval in hand, the measure goes to Gov. Corbett, who said he would sign it.

"This legislation reaffirms our strong commitment to safe and responsible natural gas development here in Pennsylvania," Corbett said in a statement minutes after the House vote Wednesday afternoon.

The 174-page bill that awaits his pen directs a majority of the fee's proceeds to the upstate areas most affected by the drilling, as Corbett insisted. But it also spreads money around to the Philadelphia region and other parts of the state.

The compromise was months in the making and for several hours yesterday appeared headed towards defeat as Republicans who control the House hustled to garner votes.

In the end, they mustered a slim majority, showcasing again the difficulties of reaching consensus on how best to deal with a burgeoning industry. Pennsylvania is the only major gas-producing state that does not tax natural gas production.

Corbett steadfastly refused to impose a "severance tax" on drillers, arguing that it would chase away an industry that is creating jobs and generating revenue in a lackluster economy.

Thus, the "impact fee" concept was born, despite loud complaints from Democrats that it amounted to a break for a deep-pocketed industry.

"This is the largest corporate giveaway in Pennsylvania history," House Minority Leader Frank Dermody (D., Allegheny) said Wednesday.

The compromise, reached last weekend between Corbett and Republicans who control both legislative chambers, calls for a fee that would fluctuate with the price of natural gas and, starting in 2013, the rate of inflation.

If the price of natural gas is between $3 and $5, the fee would be $310,000 per well over 15 years. That fee would be lower if the price falls below $3, and would increase if the price rises above $5.

In the first year alone, Republicans say, the levy would raise $180 million from 3,850 wells. On Wednesday, House Majority Leader Mike Turzai (R., Allegheny) predicted it could garner as much as $3 billion over 10 years.

A major sticking point has been how proceeds from the fee would be distributed.

The bill sends 60 percent of proceeds to localities directly affected by drilling, to cover such items as road repair - drillers' mammoth trucks have wreaked havoc on upstate roads - and increased public-safety costs.

The other 40 percent goes to statewide projects, many of them environmental, including repairs to greenways and recreational trails, protection of open space, and other beautification projects.

That means Philadelphia and its surrounding counties, which do not play host to drillers, will receive a considerable slice of the pie.

The bill also sets environmental and safety standards - not to the extent some critics had hoped - and addresses the thorny question of how much control municipalities get over whether to drill, and where. A county where drilling occurs can opt not to impose the fee - but half its municipalities can band together and force it to dun drillers after all.

On another point of fierce contention, the bill makes municipalities allow drilling in residential-zoned areas, but lets them apply zoning restrictions, as they do on other industries, on such collateral effects as lighting and noise.

The industry has been largely silent on the bill. Some environmental groups have lambasted it as a giveaway that does little to safeguard the environment. "This bill proves the adage 'money talks,' as the governor and the General Assembly adopted everything the deep-pocketed drilling interests wanted," said Jan Jarrett, president of PennFuture, a statewide group.

The Renew Growing Greener Coalition - the largest consortium of environmental, recreation and conservation groups in the state - pointed out that the fee proceeds will also help restore two depleted environmental funds that pay for long-term pollution cleanup projects.

Legislators from both parties have since 2009 slugged it out at the negotiating table over whether to enact any levy on drilling. Near the end of his tenure, then-Gov. Ed Rendell fought bitterly with Republicans for a severance tax, but the sides could not reach a compromise.

Then Corbett, running on a no-new-taxes pledge and with ample backing from the natural gas industry, was elected.

The Senate, led by President Pro Tempore Joe Scarnati (R., Jefferson), pushed for an impact fee last year, but neither Corbett nor the House wanted it. It created tensions within the party.

In the last few months, tempers cooled and Republican leaders were able to work out a compromise. Democrats griped that it was done behind closed doors, with no opposition input.

"Let's kill this bill," Rep. Camille "Bud" George (D., Clearfield), whose district was polluted in the past by coal mining waste, said Wednesday on the House floor. "This land is worth more than a sweetheart deal for industrial gas drillers."

But Rep. Kate Harper (R., Montgomery) said the bill was overdue.

"We are the very last state in the nation with natural gas drilling that does not charge a fee or severance tax - it's about time we did so," she told colleagues. "Every single day Pennsylvania drillers are not charged a fee or tax is a day drillers are drilling, not paying for the impact."

 


How They Voted

Representatives from the Philadelphia area who voted for the Marcellus Shale "local impact fee" measure were:

Philadelphia: John Taylor (R.)

Bucks County: Paul I. Clymer (R.), Gene DiGirolamo (R.), Frank Farry (R.), Bernie O'Neill (R.), Scott Petri (R.), Margaret Quinn (R.), Katherine M. Watson (R.)

Chester County: Warren Kampf (R.), Tim Hennessey (R.), John Lawrence (R.), Duane Milne (R.), Chris Ross (R.), Dan Truitt (R.)

Delaware County: Bill Adolph (R.), Steve Barrar (R.), Joe Hackett (R.), Tom Killion (R.), Nick Miccarelli III (R.), Nick Micozzie (R.)

Montgomery County: Bob Godshall (R.), Kate Harper (R.), Thomas Murt (R.), Tom Quigley (R.), Todd Stephens (R.), Marcy Toepel (R.), Mike Vereb (R.)

Voting against the bill were:

Philadelphia: Louise Williams Bishop (D.), Brendan Boyle (D.), Kevin Boyle (D.), Vanessa Lowery Brown (D.), Michelle Brownlee (D.), Mark Cohen (D.), Angel Cruz (D.), Maria Donatucci (D.), Dwight Evans (D.), Babette Josephs (D.), Bill Keller (D.), Michael P. McGeehan (D.), John Myers (D.), Michael O'Brien (D.), Cherelle L. Parker (D.), Tony Payton (D.), James Roebuck (D.), John Sabatina Jr. (D.), W. Curtis Thomas (D.), Ron Waters (D.), Rosita Youngblood (D.),  

Bucks: Tina M. Davis (D.), John Galloway (D.), Steven J. Santarsiero (D.) 

Chester: Margo Davidson (D.), Thaddeus Kirkland (D.), Greg Vitali (D.)

Montgomery: Matt Bradford (D.), Tim Briggs (D.), Lawrence H. Curry (D.), Pam DeLissio (D.), Mike Gerber (D.)

Not voting: Chester: Curt Schroder (R.)


Contact staff writer Angela Couloumbis at 717-787-5934, acouloumbis@phillynews.com or @AngelasInk on Twitter.