Op-Ed: Local Impact Fee Helps Protect Communities Where Drilling Takes Place

By Sen. Joe Scarnati

It was only several years ago that many Pennsylvanians first heard the term Marcellus Shale, and very few understood what impact it would have on our state. That has certainly changed, as this fast-growing industry brings both opportunities and challenges to our communities and a great deal of healthy debate about how to best harness its potential.

The Marcellus Shale currently ranks number one as the fastest growing natural gas production enterprise in the United States, and sixty percent of it is in Pennsylvania. The shale region has the potential to supply most of the energy needs for the Northeast for the next 100 years – that's the good news. But we also face a variety of physical, environmental and regulatory challenges as we manage this world-class resource.

Because of shale's economic potential, there are many wide-ranging opinions on if and how much we should regulate this industry. Some have proposed taxing the drilling companies and using the money to close our state's deficit. Others oppose any tax, saying that we avoid any actions that could slow the growth or make us noncompetitive.

Recently, I introduced legislation that I believe strikes a middle ground in promoting this tremendous economic opportunity while protecting the communities and residents where drilling is occurring. A Washington, D.C. think tank organization recently tried to vilify my legislation by labeling it "job killing-legislation," but nothing could be further from the truth, and elected officials in Pennsylvania (not federal lobbyists) must be the ones who ultimately decide what is in the best interests of our job creators and residents in the Commonwealth.

Senate Bill 1100 would establish a reasonable annual fee per Marcellus Shale well. The base fee would be $10,000 and adjusted upwards depending on production levels and the current price of natural gas. A majority of the revenue from the impact fee would be distributed to affected counties and municipalities to address such things as road repairs, environmental cleanup or water and sewer plant improvements in drilling communities across the Commonwealth. A portion of the fee would be dedicated to conservation districts as well as statewide environmental and infrastructure projects.

It is estimated that my proposal would capture $121.2 million in payments by March 1, 2012. In addition, each well would generate at least $160,000 in fees over a decade, based on current gas prices and widely-accepted production projections. If calculated using current gas prices, the proposal would collect at least $675 million over five years. This money will ensure communities impacted by the drilling will have the resources necessary to address a wide range of local concerns, and at the same time not push this welcomed economic development to other states.

Under Senate Bill 1100, the Public Utility Commission (PUC) would publish a model zoning ordinance for local governments. Counties or municipalities would be prohibited from receiving impact fee revenue if they adopt an ordinance that exceeds the model written by the PUC. Local jurisdictions, under the model ordinance, would retain their ability to enact reasonable restrictions on drilling. But only communities that choose to ban drilling will not collect money from the impact fees. This, to me, is a common sense approach to distributing the fee and is supported by several statewide local government organizations.

My proposal has attracted a great deal of support from local officials and environmental organizations. The Pennsylvania Association of Conservation Districts called it "a bold proposal to provide a new steady stream of funding necessary to further protect our natural resources from the mounting strain from the production of the Marcellus Shale."

I believe that the Legislature should pass this bill in the next five weeks so we can begin to distribute monies to our municipalities and counties for road improvements, water and sewage issues, as well as other community enhancements. Through a reasonable and well-thought-out impact fee on shale companies, we can manage this tremendous resource in a way that improves our economy and protects our quality of life.

For more information, visit the Marcellus Shale Impact Fee Proposal webpage on Sen. Scarnati's website.

Sen. Joe Scarnati (R-Jefferson) is President Pro Tempore of the Senate and represents all or part of Cameron, Clearfield, Elk, Jefferson, McKean, Potter, Tioga and Warren counties.