Corbett offers fee proposal for gas drilling

Gov. Corbett on Monday announced his plan to respond to the effects of Marcellus Shale natural gas drilling, proposing that individual counties set a per-well fee on drilling companies, while the state provides tougher environmental standards and enforcement.

The much-anticipated proposal offers broad measures to recoup costs associated with drilling and to hold drilling companies accountable for environmental damage, while acknowledging the huge economic benefit of an industry tapping the nation's largest-known gas reserve.

"Affordable, reliable energy allows companies to grow, but how do we get there? We have to make sure that we do this right, from the very beginning," Corbett told a crowd at an event in Pittsburgh. "If we're looking at this industry, it's a little bit beyond a newborn, it's not even crawling yet though. . . . We have to get there by smart, sound, evenhanded, level-playing-field regulation and legislation."

But a top Senate Republican leader said the proposal too narrowly benefited the roughly 40 counties where drilling occurs and signaled that it was unlikely to be approved in its current form.

"There needs to be an impact fee that will not only assist local communities affected by drilling activities, but fund important related statewide environmental programs as well," said Senate President Pro Tempore Joe Scarnati (R., Jefferson), who has pushed his own legislative proposal generating $200 million a year starting as early as 2012.

Under the Corbett plan - which the governor rolled out at a unionized carpenters training center in Pittsburgh - affected counties could set a fee of no more than $40,000 per well. The fee on each well would be reduced over time until, after 10 years, it would be eliminated.

Corbett estimated total fees could generate $120 million in the first year. That figure could grow to $195 million within six years as more wells come online, he said.

Most of the money - 75 percent - would remain in the counties where the wells are drilled. It would go toward the costs of regulating the industry and to infrastructure improvements from wear and tear on bridges and roads. Some of the revenue would be directed toward addressing population-growth issues, such as affordable housing and social services.

"It places the fee where the actual impact is," Corbett said.

The rest of the money generated would go to the state for gas-related environmental protection, road and bridge improvements, health studies relating to drilling, emergency response, and pipeline safety.

Doug Hill, executive director of the County Commissioners Association of Pennsylvania, said he was pleased the plan would reimburse counties for the industry's toll on roads and water supplies. But he is concerned about the administrative burdens placed on counties responsible for handling and distributing the fee revenue and the prospect of possible "border wars" between counties that impose a fee and those that do not.

With county commissioner elections for all but six counties set for November, he said that, even if the legislature approved the Corbett plan, no decision on a shale fee would be made until at least December.

Corbett's move to shift the fee-making decision to the counties appears to allow him to keep his campaign promise to voters not to raise taxes - any fees adopted will have been approved by county officials, not state officials.

But former Gov. Ed Rendell, who failed to get a shale tax enacted last year, disagrees.

"It shows his willingness to violate his no-tax pledge, and it augurs well for transportation," said Rendell, who wants to see additional revenue raised to improve roads and bridges. "But it's insufficient to generate enough money to take care of the counties, help the environment, and defray the cuts in the general fund."

Some Republican lawmakers, who are proposing an outright shale tax, said Corbett's plan did not go far enough.

Rep. Gene DiGirolamo (R., Bucks) with House Rep. Tom Murt (R., Montgomery) have introduced a bill to impose a 4.9 percent extraction tax on drillers that would generate as much as $562 million.

"Shale revenue should benefit the entire commonwealth, said DiGirolamo, whose proposal would split half the proceeds between local communities and the environment and direct the rest to state coffers.

DiGirolamo said his tax proposal was smaller than the 5 percent tax in West Virginia, where the Marcellus Shale industry is thriving.

"I don't believe this industry is going anywhere," he said. "This is fair, reasonable, and makes a long-term investment."

None of the money in Corbett's plan would go to the state's general fund, nor would any go to statewide environmental programs such as Growing Greener, a rapidly shrinking state fund that supports pollution cleanup.

Corbett spokesman Kevin Harley said that the governor was sticking to his promise to help areas bearing the brunt of the drilling burdens and that the fee amount reflected the nature of competition in the gas industry worldwide.

"The proposal has followed to a T what he said he'd do: that the money go to affected counties. That's why it's called 'an impact fee,' " Harley said.

Environmentalists said they were pleased that the proposal increased setbacks for wells near waterways or municipal water supplies, set aside funding for plugging abandoned wells, and doubled civil penalties for companies that violate environmental laws.

But they said the plan fell short of the amount needed to offset the effects to conservation, recreation, and the environment.

"Though the governor says all the revenue should be used for industry-related impacts, he ignores the fact that these impacts extend far beyond local communities," said Andrew Heath, president of the Renew Growing Greener Coalition.

Harley said Corbett kept the fee at what he believed was a reasonable amount in order to stay competitive.

"What these people don't realize is that we are in competition with other states and nations. Pennsylvania has to remain competitive," he said.

The Marcellus Shale gas formation runs from New York to Virginia and lies beneath three-quarters of Pennsylvania. None of the gas is in Philadelphia or the four suburban counties that make up the Philadelphia region - Delaware, Chester, Montgomery, and Bucks. Drilling permits have been in issued in 40 of Pennsylvania's 67 counties.

Maya van Rossum, head of the Delaware Riverkeeper Network, called the impact fee a "drop in the bucket."

"It doesn't matter how much money he tries to raise off of this," van Rossum said of Corbett. "The fact of the matter is, he can never raise enough money to avoid the public-health harm, the environmental harm, the community harm that people suffer when gas drilling happens. . . . He is sacrificing Pennsylvanians for his own political cache, and that is really poor leadership."

The Marcellus Shale Coalition, which represents 244 gas companies, said the governor's plan would allow the fast-growing industry to flourish.

"Pennsylvanians are realizing the countless benefits - more affordable energy costs, environmental advantages of increased natural gas use, economic revival of so many communities - tied to responsible natural gas development," said coalition president Katharine Klaber. "And Gov. Corbett's plan announced today should build upon this momentum, in all corners of the Commonwealth, for years to come."