CliffsNotes Aren’t Good Enough for Marcellus Shale Policy

After months of study and speculation, policy changes in Pennsylvania last week.

Based largely on recommendations from the 137-page report of his Marcellus Shale Advisory Commission released in July, the governor’s recommendations cover a broad range of areas dealing with gas drilling.

From an environmental standpoint, Corbett proposed increasing the setback distance for wells near bodies of water from 100 feet to 300 feet, increasing well bonding from $2,000 up to $10,000, increasing blanket well bonds from $25,000 up to $250,000, expanding a drillers' presumed liability for impairing water quality from 1,000 feet to 2,500 feet from a gas well, and extending the duration of presumed liability from six months after well completion to 12 months.

He also proposed enabling the state Department of Environmental Protection to take quicker action to revoke or withhold permits for operators who consistently violate rules, double penalties for civil violations from $25,000 to $50,000; and double daily penalties from $1,000 a day to $2,000 a day.

Governor Corbett’s plan will also allow for an “impact fee”, which would be adopted by counties for use by local communities experiencing the actualimpacts of the drilling.

Each well will be subject to a fee of up to $40,000 in the first year, $30,000 in the second year, $20,000 in the third year and $10,000 in the fourth through tenth years, adding up to a potential total of $160,000 per well.

If enacted into law, the impact fee revenues will be split with 75 percent staying at the local level, with 36 percent of that number retained by the county, 37 percent distributed to municipalities that host the drilling pads and 27 percent distributed to all the municipalities within a Marcellus drilling impacted county. The distribution formula will be based on population and highway miles.

Under this proposal, a county may provide for a fee credit of up to 30 percent if the driller makes approved investments in natural gas infrastructure, which include setting up natural gas fueling stations or natural gas public transit vehicles.

The remaining 25 percent of the fee would be divided, with 70 percent of that amount going to the state Department of Transportation for road, bridge, rail and other transportation infrastructure maintenance and repair within counties hosting Marcellus natural gas development, and smaller amounts going to statewide emergency management and environmental programs.

According to Corbett, counties and municipalities could use these funds on expenses related to impacts from natural gas development, including (but not limited to) construction, repair and maintenance of roads, bridges and other public infrastructure; water, storm water and sewer system construction and repair; emergency response preparedness; preservation and reclamation of surface and subsurface water supplies; records management, geographic information systems and information technology.

As a legislator representing an epicenter of Marcellus Shale activity, what do I think of the proposal? I’m honestly not sure yet, mainly because it’s only that—a proposal.

After all this time and debate, the governor should have presented the Legislature with an actual bill clearly laying out what he would support. His party has a massive majority in both the House and Senate, so in theory a bill should be pretty simple to get passed into law even without bipartisan support.

The governor failed to address the issue of preemption of local ordinances— would a municipality have to adopt a statewide model ordinance to receive money from the impact fee?

And why pass this down to the counties? Under this proposal, each county could enact its own fee less than the limit set forth by the governor, which means neighboring counties would be competing with one another by undercutting the fee and setting up border wars within the state.

The natural gas drilling industry has made it overwhelmingly clear that it wants to eliminate local ordinances to create uniformity and consistency in the law—doesn’t this proposal make it even more fragmented?

Do you think doing this as county-level enabling legislation instead of a statewide law has anything to do with the no-tax pledge from Grover Norquist’s Americans for Tax Reform—which is signed by Corbett and more than 30 legislators?

You had better believe it does.

By doing it this way, counties will technically be the ones to implement the fee, not the Legislature. Inconsistency and additional needless bureaucracy are apparently a small price to pay for being able to pass the political buck.

By failing to go all the way and present the Legislature with a complete bill, Corbett has almost ensured there is no way this will pass before the end of the year as many had hoped. There are still way too many issues to be worked out, and the Legislature is far too fractured (no pun intended) along geographical and political lines to likely come to a real consensus any time soon.

This has gone on too long. Both the pro-drilling and anti-drilling voices in Pennsylvania have been demanding a substantive debate resulting in coherent policy.

There is too much at stake for businesses, governments and landowners to let the issue drag on any longer. I don’t necessarily disagree with much of Corbett’s proposal (I am a staunch supporter of keeping any impact fee local), but it’s just not complete enough to be seriously analyzed, much less voted on.

We need to write the book on Marcellus Shale policy in Pennsylvania, not just stumble into class with the Cliffs Notes.