Sunday, February 5, 2012

Senate, House May Act On Compromise Marcellus Shale Bill This Week

Senate and House Republicans and the Governor's Office have reached an apparent agreement on Marcellus Shale legislation which includes a uniform, but county-adopted drilling impact fee and a set of more than a dozen additional environmental protection measures.
            Click Here for a staff summary of what is being called the House Bill 1950 Conference Committee Report.
            House Bill 1950 is now on the Senate Calendar.  To adopt the compromise language the Senate will have to formally insist on its amendments, the Senate and House would form a six member Conference Committee, that Committee must meet and adopt the proposal which then goes to the full House and Senate for adoption.
            The tentative schedule seems to be having the Senate and the House vote this week before going into budget hearings.
Shale Impact Fee Near Final Deal
            Compromise Details
            Here are some details available now on the compromise proposal.  No doubt more will be available later.
            The drilling impact fee is a true compromise between proposals by the Senate and the Governor.  It would set a uniform statewide per well fee, but one adopted by each county in the Marcellus Shale area and collected by the Public Utility Commission.  In addition, the per well fee would increase if the price of natural gas increases.
            The fee would start at $40,000 per well dropping to $5,000 in year 11 if the price of natural gas is up to $2.25 per thousand cubic fee.   At the upper end of the fee schedule, the fee would increase to $60,000 per well dropping to $10,000 per well if the price of natural gas is $6 or more per MCF.
            If county commissioners fail to adopt the fee, there is a provision allow municipalities to adopt resolutions supporting a fee and if half the municipalities representing at least half of the county's population adopt fee resolutions a county-wide impact fee would be adopted.
            The PUC is also authorized to adjust the fee based on the Consumer Price Index.
            Revenue from the fee would be distributed as follows--
>> Off The Top Distributions:
-- County Conservation Districts: For 2011- $2,500,000; 2012- $5,000,000; 2013 and thereafter- $7,500,000; Beginning in 2014, the $7,500,000 shall be increased by an increase in the CPI. Half of the revenue distributed can be used for anything consistent with Conservation District Law, half is to be distributed by State Conservation Commission in manner consistent with Conservation District Law and Allocation Program-Statement of Policy
-- Fish and Boat Commission- $1,000,000
-- Public Utility Commission- $1,000,000
-- DEP for enforcement of acts relating to clean air and clean water- $6,000,000
-- PEMA- $750,000- emergency response planning, training
-- State Fire Commissioner- $750,000
-- Rail freight assistance- $1,000,000
-- Natural gas energy development: 2011- $10,000,000; 2012-$7,500,000; 2013-$2,500,000
-- Remaining revenues are divided 60% to counties that have imposed fee, and 40% to statewide initiatives
>> County Distribution:
-- 36 percent to counties in which spud unconventional gas wells are located: Amount for each county determined using formula that divides number of spud wells in county by number of spud wells in state and multiplies the percentage by dollars available
-- 37 percent to qualifying municipalities- same formula
-- 27 percent to qualifying municipalities- amount available determined by dividing number of spud unconventional gas wells in county by number of spud unconventional gas wells in state and multiplying percent by amount available for distribution
   -- 50 percent to municipalities that have spud wells or are contiguous with a municipality in which a spud well is locate or are within 5 linear miles of a spud unconventional gas well
         -- 50 percent to each qualifying municipality using formula that divides the population of eligible municipality within county  by total population of all eligible municipalities within county and multiplies resulting percentage by amount allocated
         -- 50 percent to each qualifying municipality using a formula that divides highway mileage of municipality by total highway mileage of all eligible municipalities within county and multiplies that percentage by amount allocated 
   -- 50 percent to each qualifying municipality in county regardless of whether an unconventional gas well is located in the municipality:
         -- 50 percent based on population in municipality as % of population in county
         -- 50 percent based on highway mileage in municipality as % of highway mileage in county
   -- Restriction- amount allocated to qualifying municipalities shall not exceed $500,000 or 50 percent of total budget for the prior fiscal year beginning with 2010 budget year
         -- Any remaining money shall be deposited in the Housing Affordability and Rehabilitation Enhancement Fund
>> Housing Affordability and Rehabilitation Enhancement Fund- off the top of county money: 2011- $2,500,000; 2012 and thereafter- $5,000,000
   -- Provide support to projects in county in which unconventional gas wells are located that increase availability of housing for low-income and moderate-income individuals and families
   -- Provide rental assistance in county where wells are located
   -- No less than 50 percent of funds shall be used in 5th-8th class counties
>> Uses For Revenue By Counties, Municipalities
-- Counties and municipalities shall use funds only for following purposes associated with natural gas production:
   -- Construction, reconstruction, maintenance, repair or roadways, and public infrastructure
   -- Water, storm water and sewer systems
   -- Emergency preparedness and public safety
   -- Environmental programs, trails, parks, recreation, flood plain management, conservation districts
   -- Preservation and reclamation of surface and subsurface waters
   -- Tax reductions (including homestead exclusions)
   -- Projects to increase availability of safe and affordable housing
   -- Records management, geographic information systems and IT
   -- Delivery of social services
   -- Judicial services
   -- County or municipality capital reserve fund
   -- Career and technical centers for training of workers in oil and gas industry
   -- Local or regional planning initiatives
>> Statewide Initiatives
-- Creation of Marcellus Legacy Fund: 40 percent of remaining revenue after off-the-top distributions are made
-- 20 percent to Commonwealth Financing Authority for:
   -- Acid mine: damage, abatement and cleanup and mine reclamation- priority given to projects which recycle and treat water for use in drilling operations
   -- Orphan or abandoned oil and gas well plugging
   -- Projects complying with Pa Sewage Facilities act
   -- Greenways, recreation trails, open space
   -- Establish baseline water quality data on private water 
   -- Watershed programs
   -- Up to 25% of funds may be used for flood-control projects
-- 10 percent to Environmental Stewardship (Growing Greener) Fund
-- 25 percent to Highway Bridge Improvement Restricted Account in Motor License Funds to counties to be distributed to fund the cost of the replacement or repair of locally owned at-risk deteriorating bridges
   -- Funds distributed to counties proportionately based on population
   -- Each county receives a minimum of $40,000
   -- 1st or 2nd class county may submit plan to PennDOT to use it funds for bridges owned by public transportation authority 
-- 25 percent for water and sewer projects – in 2011 and thereafter
   -- 50 percent to Pa Infrastructure Investment Authority
   -- 50 percent to H20 Pa to be used by Commonwealth Financing Authority
   -- Prohibition on grants for projects located in a city or county of 1st or 2nd class shall not apply to these funds
-- 15 percent for planning, acquisition, development rehab and repair of greenways, rec trails open space
   -- Funds may be used to acquire lands for recreation or conservation purposes and land damaged or prone to drainage by storms or flooding
   -- Distributed based on county population
   -- Minimum of $25,000 per county
-- 5 percent to DCED in 2011, 2012, and 2013 for projects relating to liquid natural gas
-- 5 percent to Hazardous Sites Cleanup Fund starting in 2014 and thereafter
-- Funds distributed shall not be used for PR, outreach not directly related to project implementation, communications, lobbying or litigation
-- DEP and DCNR shall review applications for funding as requested by CFA
-- Small business- producers shall provide maximum practicable contracting opportunities for diverse small businesses, including MBE, WBE and veteran owned businesses
>>Distribution from DCNR Oil and Gas Lease Fund
-- Funds appropriated under the Fiscal Code shall be distributed before allocations here
-- Environmental Stewardship (Growing Greener) Fund: 2013-$20,000,000; 2014 and each year thereafter- $35,000,000
-- Hazardous Sites Cleanup Fund: 2015- $5,000,000; 2016 and thereafter- $15,000,000
>> New Natural Gas Energy Development Fund
-- Grants: 2012-2013- May not exceed $10,000,000, $5,000,000 shall be allocate for local transportation organizations; 2013-2014- $7,500,000 and anything unused from 2012-2013, 50 percent for local transportation organizations; 2014-2015- $2,500,000, and anything used from 2013-2014
-- Creates Natural Gas Energy Development Program: Funds to be used for competitive grants, Projects must provide or demonstrate:
   -- Plan to convert 5 or more fleet vehicles into eligible vehicles or purchase 5 or more eligible vehicles
   -- Statement of projected usage of natural gas in gasoline or diesel gasoline equivalents
   -- Cost of project
   -- Source and amount of funds to be contributed by applicant
   -- Intent to maintain operations in state for not less than 6 years
   -- Vehicle will be registered in state
   -- Utilization of federal funds to extend funds are available
   -- Whether or not utilization of natural gas fueling facility is accessible to public
>> Other Provisions
            The environmental protection provisions of the compromise bill would increase setbacks from water wells, reservoirs and streams, require the restoration of well drilling pads in 9 months, require the disclosure of fracking chemicals but still protected by trade secrets, increases bonding and increases criminal and civil penalties.

            Local regulation of drilling and related natural gas development facilities by local governments would have to occur within a prescribed set of requirements specified in the compromise language.  The Public Utility Commission is given the authority to determine if a local ordinance complies with the requirements prior to enactment.  Local governments that adopt their own fee or an ordinance in violation of the new act would not be eligible to receive funding from the state fee.

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