New Drilling Fee Proposal Moves Out Of Senate Appropriations Committee

The Senate Appropriations Committee this evening approved, largely along party lines, an amendment offered by Sen. Joe Scarnati (R-Jefferson) to Senate Bill 1100 proposing a uniform, statewide Marcellus Shale drilling fee starting at $50,000 per well, per year decreasing to $10,000 after 10 years.

Senate Democrats offered their own proposal starting at $75,000 per well, which was defeated.

Click Here for a summary of the Scarnati amendment.

The new fee proposal is expected to raise $27.5 million from fees imposed for 2010, $95 million in 2011, $160 million (or so) in 2012 and $210 million in 2013. The original proposal in Senate Bill 1100 from Sen. Scarnati would have raised $45 million in 2010 and $76.2 million in 2011-12.

The proposal offered by Senate Democrats would have raised $150.3 million in 2011, $260 million in 2012, $380.4 million in 2013 and $491.5 million in 2014.

Revenue from the new proposed drilling fee would be distributed to:

-- County Conservation Districts: $2.5 million for 2011, $5 million for 2012 and thereafter;

-- State Fire Commissioner: $1.5 million annually;

-- Fish & Boat Commission: up to $1.5 million;

-- Local Government Initiatives: 55 percent of revenues would be allocated to local governments impacted by natural gas activities-- 36 percent to host counties, 37 percent to host municipalities, 27 percent to host and non-host municipalities in host counties.

The funding could be used for local projects which: improve emergency preparedness and public safety, road, bridge and infrastructure projects, water, stormwater and sewer systems and other environmental projects, records management and information technology, tax reductions.

-- PA Housing Finance Agency for use in host counties: $5 million;

-- Statewide Initiatives: 45 percent would be allocated for these statewide initiatives:

-- 25 percent to the Commonwealth Financing Authority for projects which: recycled acid mine drainage water for use in drilling operations; plug orphaned or abandoned oil and gas wells; for planning acquisition, development, rehabilitation and repair of greenways, recreational trails, open space, parks and beautification projects; sewage treatment; and programs to establish baseline water quality data on private water wells.

-- 25 percent to Highway Bridge Improvement Restrict Account

-- 25 percent for water and sewer projects funded by PennVEST and the H2O Program

-- 5 percent to the Hazardous Sites Cleanup Fund

-- 15 percent to Environmental Initiatives for planning, acquisition, development rehabilitation and repair of greenways, recreational trails, open space, natural areas, community conservation and beautification projects, community and heritage parks and water resource management using a formula based on county population.

-- 5 percent for DCED in 2011 thru 2013 to provide for the planning, development and construction of a facility to liquefy natural gas or convert natural gas to ethane, propane or similar substances. After 2013, the Hazardous Sites Cleanup Fund percentage will increase to 10 percent.

In addition to these expenditures, revenue generated from a specific fee scheduled imposed for 2010 would be used to fund a Natural Gas Development Program to be used by local governments, school districts, non-profits, the Turnpike and state-owned or state-related universities to convert buses, transit vehicles and other fleet vehicles to natural gas and to fund natural gas fueling stations.

Local Ordinances

The Scarnati amendment does not include a blanket exemption from regulating drilling as a land use by local governments as proposed by Gov. Corbett and House Republicans.

It does include a process, based on the ACRE Program adopted to deal with similar issues related to agriculture, that allows drilling companies to request the Attorney General to review local ordinances to determine whether it allows for the reasonable development of oil and gas mineral rights.

Other Changes

The amendment would also increase the blanket bonding amounts for wells, adds a new section requiring DEP to notify public drinking water systems of any spill potentially affecting their water supplies, requires gathering line operators to comply with corrosion control requirements of the Underground Utility Line Protection Law and brings all pipelines related to Marcellus Shale natural gas development under the One Call Program.
The bill is now on the Senate Calendar and in position for a final vote.

Reaction

Sen. Jim Ferlo (D-Allegheny), who offered the Senate Democratic amendment to the bill, said after the Committee action:

"It is time we stop stalling on real, responsible Marcellus Shale legislation. My amendment would have provided stronger protections for Pennsylvania's environment and citizens, allowed local governments the ability to control zoning of drilling sites, and given homeowners in the Marcellus Shale region much needed peace of mind.

"It is unfortunate that the legislature continues to tip-toe around a strong severance tax, while allowing Pennsylvania taxpayers to be needlessly burdened by the Marcellus Shale industry. Now we are forced to work around a fee proposal that doesn't provide appropriate revenue to mitigate the impacts created by the industry or compensate the state for the resource it is providing."

House Bill

The House just started to go through consideration of now over 100 amendments to their version of Marcellus Shale legislation-- House Bill 1950 (Ellis-R-Butler). After considering two amendments, the House adjourned for the night.