Senate, House Send Drilling Fee, Environmental Protection Bill To Governor

The House Wednesday voted 101 to 90 to send Marcellus Shale legislation-- House Bill 1950 (Ellis-R-Butler)--  to the Governor for his signature.  The House followed a 31 to 19 vote in the Senate Tuesday to approve the same legislation.
            House Bill 1950 contains a uniform, statewide county-adopted drilling impact fee and a set of more than a dozen additional environmental protection measures.  In addition, the bill contains a transfer of monies from the DCNR Oil and Gas Fund to the Environmental Stewardship (Growing Greener) Fund. (Click Here for bill summary.  Click Here for revenue distribution.)

            If all the Marcellus counties adopted the drilling fee, the fee would raise about $180.5 million in 2011 and $211.1 million in 2012 and revenue would increase to about $355 million in 2015.  (Click Here for revenue projections.)
            Unfortunately, these gains in funding for local government and environmental projects were offset in part Tuesday in the Governor's FY 2012-13 budget proposal which calls for $56.6 million in funds from the Keystone Recreation, Parks and Conservation Fund and the Cigarette Tax to go to the General Fund to balance the state budget. 
            About $36.1 million from the Keystone Fund and $20.5 million from the Cigarette Tax goes to the General Fund.  While Department of Agriculture staff have said the $20.5 million will be made up with interest payments from the Growing Greener II bond fund, that is still a net loss to environmental funding.
            "This new industry has brought economic growth and jobs, but it has also brought new challenges," said Sen. Joe Scarnati (R-Jefferson), a prime sponsor and an advocate for Marcellus Shale legislation.  "The most important issue in this whole conversation is the protection of our natural resources and the communities where drilling takes place. I believe we can have the jobs that this new industry brings, and we can still protect our environment in a balanced way.
            "This legislation will help communities in the Marcellus Shale region provide for reasonable local zoning parameters and implement strong environmental protections. Drillers will pay their fair share, and that revenue will help our state and its citizens as this industry continues to grow.
            "Local governments will retain their traditional powers to provide for local zoning and regulation, and we can, at the same time provide for the development of natural gas and the jobs and opportunities that this industry brings.
            "The Marcellus Shale industry is here to stay in Pennsylvania – bringing us jobs, huge economic benefits and the potential for energy independence," Sen. Scarnati said.  "It makes sense to impose a reasonable impact fee on the industry to provide the funding necessary to further protect our natural resources, particularly at a time when our state is being forced to stretch our tax dollars." 
            Gov. Tom Corbett  thanked the members of the House and Senate for passing House Bill 1950, which is a comprehensive Marcellus Shale package. The Conference Committee report passed today in the House.
            “After long negotiations and a lot of hard work, we have reached a consensus on how to address the impacts in the Marcellus Shale regions,” Corbett said. “I am very pleased with the cooperative spirit shown by the General Assembly and their staffs while working to resolve this complex issue. I look forward to signing this legislation into law.”
            Last October, Corbett outlined his Marcellus Shale proposal, which followed the work of the Marcellus Shale Advisory Commission and includes a plan to help create thousands of jobs for Pennsylvania residents, to enhance protection of our natural resources, and to move the state toward energy independence.  House Bill 1950 contains 24 of the legislative recommendations offered by the advisory commission.
            “This legislation reaffirms our strong commitment to safe and responsible natural gas development here in Pennsylvania,” Corbett said.
            The Renew Growing Greener Coalition, the largest coalition of conservation, recreation and environmental organizations in the Commonwealth, issued the following statement from Executive Director Andrew Heath, expressing support for the environmental funding outlined in the current Marcellus Shale impact fee proposal: 
            “At first glance, this proposal appears to be a good first step toward restoring funding for the Environmental Stewardship Fund and supporting Growing Greener programs and projects that protect our drinking water, conserve our open space, enhance recreational opportunities and stimulate economic recovery across the Commonwealth. 
            “We commend the General Assembly and the Governor for recognizing the importance of Growing Greener, which has transformed Pennsylvania by empowering communities to preserve working farms and conserve special places, clean up rivers and streams, improve parks and trails, maintain our heritage areas, and revitalize cities and towns."
            The PA Association of Conservation Districts Tuesday issued the following statement in response to the Marcellus Shale Local Impact Fee (House Bill 1950) that passed the Senate.
            "Today, Pennsylvania's Senate made an important and historic investment in our environment, communities and our citizens," said Robert B. Maiden, Executive Director of the Pennsylvania Association of Conservation Districts. "The action taken by the Senate today to pass the local impact fee should be applauded by citizens and communities around the state. PACD appreciates the commitment of the Senate, especially Sen. Scarnati, to ensure that Pennsylvania’s environment and communities are protected and safeguarded for generations to come. We look forward to the House of Representatives passing this important bill for the future of conservation in Pennsylvania."
            The County Commissioners Association of Pennsylvania Monday wrote to members of the House and Senate saying they supported the compromise Marcellus Shale bill.
            "The bill includes provisions counties have sought, including meaningful revenues and a meaningful local share, a workable levy and administrative mechanism, the distribution formula we have sought, allowable uses that meet the broad and divergent needs of impacted counties and their municipalities, additional funding to counties from state shares to provide for bridge repair and replacement and for greenways, and allocation of funding proceeds statewide to conservation districts and some environmental programs."
            Matthew J. Ehrhart, Pennsylvania Executive Director for the Chesapeake Bay Foundation and a member of the Governor’s Marcellus Shale Advisory Commission, Monday issued the following statement in response to the final Marcellus bill being voted out of conference committee. 
            “House Bill 1950 represents a tremendous step forward for the Commonwealth in managing current and future drilling operations in the Marcellus Shale formation. This bill combines the best of the environmental protection provisions from both Senate Bill 1100 and House Bill 1950, and improved upon them. The result is a package that while not perfect, will help protect Pennsylvania’s environment. 
            “This bill is the only option we have to increase protections to the environment and our communities. CBF supports much of the proposed language of House Bill 1950, and encourages the General Assembly to work together to pass this legislation.
            “We are encouraged by the attention paid to increased environmental protections. Specifically, the Bill would provide: protective setbacks from wells, public drinking supplies, structures, streams, and wetlands over one acre; post-construction management plans; floodplain protections; water management plans; for required erosion & sediment inspection before drilling can begin; for required best management practices for chemical storage; standards for drill-site containment practices; clear authorization to DEP for the management and oversight of wells; and increased fines and bonding.  
            “The Bill also provides tremendous financial resources to the Growing Greener program and other environmental interests such as water infrastructure, sewer infrastructure, and watershed projects. CBF does, however, believe that a significantly higher impact fee is warranted.
            “There are a few issues that were left out of this legislation and that we will work to resolve. These include: a more inclusive definition of water and water bodies; required disclosure of  fracking chemicals for all drilling operations, not only unconventional wells; and requiring complete public disclosure of waste water manifesting."
            Paul King, President of the PA Environmental Council, issued this statement in reaction to the Marcellus Shale bill conference committee report:
            "The enemy of the good is the perfect, and while this legislation is not perfect, the people of Pennsylvania are better served by passage of this bill now than to wait another year or longer for something stronger.
            "The Pennsylvania Environmental Council has worked hard over the past two years to identify the critical policy issues for effectively regulating development of the Marcellus Shale gas industry. PEC has released a series of reports and legislative proposals, containing more than 40 specific policy recommendations, several of which are now law.  We are pleased that many of the environmental protection measures contained in this bill match those recommended by PEC, and represent a meaningful step forward: including greater well site setback and containment standards, enhanced inspection and reporting requirements, and greater protection for water resources and drinking water supplies.   
            "However, this legislation comes up short on several key issues, including complete enhanced public disclosure of the chemicals used in hydraulic fracturing fluids, as well as automatic reporting to the Department of Environmental Protection on wastewater handling and disposal.  
            "Additionally, PEC remains concerned with the limitations this bill imposes on the rights of local governments in managing drilling activities in their own jurisdictions. We believe that local government should retain a degree of authority to enact additional controls when specific, local circumstances warrant.
            "This legislation would take an important first step toward ensuring safe development of natural gas in Pennsylvania by incorporating many of the recommendations of the Marcellus Shale Advisory Commission. But this is only the first step; much more work remains to be done to ensure that the growth of this industry is truly an asset for all of Pennsylvania’s citizens and our environment.
            "We look forward to working with the General Assembly and the administration, particularly DEP, in advancing implementation of other PEC recommendations through the legislative and regulatory process."
            Marcellus Shale Coalition president Kathryn Z. Klaber issued the following statement upon the passage of H.B. 1950 through the Pennsylvania General Assembly:
            “The Marcellus Shale Coalition has steadfastly advocated for a modernized oil and natural gas regulatory framework to further protect the Commonwealth’s environment while encouraging the safe development of abundant and clean American natural gas.  This legislation builds upon, and further strengthens, the collaborative efforts undertaken over the past several years, ensuring that Pennsylvania has industry-leading, world-class shale gas regulations on its books.
            “The legislation, while not perfect, provides the industry greater certainty to operate across Pennsylvania and takes a balanced approach to further strengthening the Commonwealth's forward-leaning health, environmental, and safety regulations, incorporating many of the recommendations of the Marcellus Shale Advisory Commission – a broad-based group of interests across industry, government, and the conservation community.  Without question, it will further increase costs, in terms of both time and resources, at a time of historically-low natural gas prices, which will affect decisions made into the future.
            “With resolution and greater certainty at hand, it is time to build a stronger Pennsylvania and power our region with clean, American natural gas.”
            More Marcellus Shale Bill Details
            Here are several more details of the provisions in House Bill 1950.
Drilling Fee: 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 or 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.
Environmental Protection: 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: 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.
            Click Here for bill summary.  Click Here for revenue distribution. Click Here for revenue projections.

Senate Approves Proposed Fee On PA Shale Drilling
Conference Committee Approves Drilling Impact Fee
Final Drilling Impact Fee Bill Clears First Vote
Lawmakers Agree On Bill To Impose Drilling Fee
Conference Committee Sends Drilling Fee Bill To Floor Vote
Gas Drilling Fee Moves Forward In PA
Drilling Fee Would Yield $190 Million First Year


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