Senate President Pro Tempore Joe Scarnati (R-Jefferson) today unveiled a Marcellus Shale impact fee proposal he said will generate $121.6 million in FY 2011-12, more, he said, than the proposal many Senate Republicans were willing to support during last year's discussions. The proposal would have a base fee of $10,000 per well, plus an additional factor for gas production and the price of gas. Over time, Sen. Scarnati said, as production and the price of natural gas increases to $5 per MCF, his proposal could generate $1 billion in revenue over five years.
The Public Utility Commission would be in charge of administering the fee and distributing the proceeds to county and local governments impacted by drilling and to the statewide restoration programs included in the plan.
Sixty percent of impact fee revenue would go to a newly established Local Services Fund for counties and local governments affected by drilling operations: 36 percent for counties with producing wells, 37 percent municipalities with producing wells and 27 percent to municipalities without producing wells, but located in counties with producing wells.
These funds could be used by counties for:
-- Reconstruction, maintenance and repair of municipal roadways and bridges;
-- Preservation and improvement of municipal water supplies;
-- Maintenance and capital improvements to municipal waste and sewage systems;
-- Preservation and reclamation of the surface waters of the municipality; and
-- Other lawful purposes reasonably related to the health, welfare and safety consequences of severing natural gas in the municipality.
The remaining 40 percent of the fee revenue would go to:
-- County conservation districts, perhaps as much as half of this amount; and
-- Statewide environmental and infrastructure impacts, including environmental cleanup projects distributed through the Commonwealth Financing Authority, water and sewer infrastructure, impacted state highway improvements and hazardous sites cleanup.
Sen. Scarnati said he is open to discussing changes to the proposal, but would not look to reduce the 60 percent share of revenue going directly to impacted local governments.
The proposal would also direct the Public Utility Commission to publish a model municipal zoning ordinance to regulate Marcellus drilling operations within their existing authority. Any county or municipality adopting measures which go beyond this model ordinance would be ineligible for impact fee revenue.
The $121.6 million revenue estimate for the proposal's first year are based on collecting the new fee for both 2010 and 2011 from Marcellus Shale drilling companies. It uses a natural gas price of $4.50 per MCF and assumes 1,500 new wells per year will be drilled in the state beginning this year.
Sen. Scarnati said he met with Gov. Corbett on Monday and talked about the proposal in detail, saying he got a "yellow light" from the Governor, not a green light or red light, a yellow light. With respect to the House, Sen. Scarnati said, "I cannot see how we get a state budget process done with all the cuts without addressing an impact fee on this industry." The public has connected the dots, he said, between big budget cuts and the drilling industry not paying a fee or tax and he's confident House Leadership will too.
He hopes to introduce the proposal in bill form in about a week and looks to move it out of committee after the May 17 Primary Election break with a final Senate vote in early June.
A summary of the proposal is available online, along with revenue estimates for coming fiscal years.
A summary of the proposal is available online, along with revenue estimates for coming fiscal years.
Listen to a portion of Sen. Scarnati's conference call with reporters announcing the proposal.
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