Senate Committee Reports Out Marcellus Shale Fee Bill To Move Process

The Senate Environmental Resources and Energy Committee today amended and reported out Senate Bill 1100 (Scarnati-R-Jefferson) establishing a Marcellus Shale Impact fee and requiring the development of a model local zoning ordinance to control drilling activities. The bill is intended to provide a vehicle for the impact fee issue.

The vote on the amendment and the bill were unanimous, but Committee members took turns expressing concerns about the amendment and the bill itself, some noting they plan to offer amendments of their own once the bill reaches the Senate Floor.

Sen. Mary Jo White (R-Venango), Majority Chair of the Committee, described the amendment as turning the bill into a pure impact fee bill, rather than what she said was a severance tax based in part on well production.

The amendment establishes only a per well fee for the first 10 years of production starting at $40,000 per year, dropping to $10,000. Sen. White's office estimates the fee revenue will bring in: $110 million in 2011; $137 million in 2012; $155 million in 2013; $170 million in 2014; and $185 million in 2015.

The amendment also makes a number of changes to the distribution of the funds raised--

-- Creates a housing credit for up to 30 percent of a well fee owed by an operator for contributions to a local affordable housing fund or organization;

-- Allocates $1 million per year to the State Fire Commissioner for local community emergency service organization training and equipment grants;

-- Removes trails, parks and recreation, open space, floodplain management and agricultural preservation from eligible uses of the local and state share funding;

-- Revises the way local share funds going to county conservation districts are handled, but keeps the conservation allocation in the bill;

-- Reduces the amount allocated to the Commonwealth Financing Authority under the state share from 80 to 60 percent and provides that no more than 40 percent of the funds can go for water, stormwater and sewer system projects;

-- Increases the amount of the state share funding going to the Motor License Fund for state road and bridge repairs;

-- Increases the amount of money going to the Hazardous Sites Cleanup Fund from 10 to 20 percent of the state share;

-- A priority for state share money was added to include acid mine drainage, cleanup and reclamation projects which recycle and treat mine drainage water for use in drilling operations; and

-- Adds a provision requiring the elimination of the impact fee if a severance tax is adopted.
A copy of the amendment and a summary is available at the Committee website.

Sen. John Yudichak (D-Luzerne), Minority Chair of the Committee, noted the significance of the action taken today saying this is the first action by the Senate on any Marcellus Shale fee or tax bill, although he said the structure and allocation of funds in Senate Bill 905, which he and Sen. Ted Erickson (R-Delaware) sponsored, were closer to what he thought was needed.

He said, like Sen. Scarnati, the impact fee legislation should be part of the budget talks because the revenue generated by the bill is necessary to offset local impacts of drilling and expressed concerns about taking away local authority to control the impacts of drilling through zoning.

A new poll out today from Quinnipiac University shows voters support imposition of a Marcellus Shale tax 69 to 24 percent and for the first time regional support tops 60 percent in every region of the state.

The bill now goes to the Senate Floor and is expected to be referred to the Senate Appropriations Committee.

A summary of the original bill is also available online.