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Tuesday, June 14, 2011

Impact Fee Proposed on Natural Gas Wells

- Impact Fee Proposed on Natural Gas Wells

Tuesday, June 14, 2011
Pittsburgh Post-Gazette
by Laura Olson

A state Senate measure to charge natural gas drillers a per-well impact fee will be getting some tweaks today, in an effort to move forward on the measure as lawmakers head into final budget talks.

One lawmaker says those are the beginning of a more comprehensive revamp to the drilling fee legislation, which is being negotiated by supporters in that chamber.

The Senate Environmental Resources and Energy Committee this morning will be taking up the impact fee bill from the chamber's President Pro Tem Joe Scarnati, R-Jefferson. An amendment from the panel's chairwoman would raise the initial amount of that fee, Although no fee would be assessed after the 10th year of production.

Under Mr. Scarnati's current bill, a $10,000 base fee would be charged, with that fee rising based on the price of natural gas and level of production. The senator's staff estimates that the average fee for a well in its first year of production would be between $25,000 and $30,000.

Of the revenue collected, 60 percent would go to local and county governments with drilling activity. The other 40 percent would go for environmental initiatives.

Changes from Sen. Mary Jo White, R-Venango, would start that fee at a flat $40,000, lowering it by $10,000 per year in the second, third and fourth years. A fee of $10,000 would be assessed from years four through 10.

Adam Pankake, the Senate panel's executive director, said that reflected the decrease they'd seen in the impacts on local communities as a well ages. As production decreases -- which occurs rapidly during the first few years that a shale well is producing -- the truck traffic and other strains on a municipality also shrink, he said.

Ms. White's proposed changes would also narrow how the 40 percent that goes toward environmental initiatives could be used. With the current measure, some funds could be used for open-space preservation and recreation trails. That option would be removed, Mr. Pankake said.

Another change would allow drillers a credit of up to 30 percent of their overall fee if they donate to a county housing trust fund or a nonprofit involved in affordable housing.

Drew Crompton, Mr. Scarnati's chief of staff, said the senator was pleased that his measure will probably be moving forward, but added that there were "some aspects that are going to need further conversation." Those include the proposed changes to how the environmental funds can be spent, he said.

Sen. Tim Solobay, D-Canonsburg, said other changes were under discussion for a broader overhaul of the fee proposal. Funding for continued training of emergency responders, as well as incentives for converting fleet vehicles to natural gas, could be included, he said.

Mr. Solobay said he supported the general aim of the impact fee plan to send the majority of funding to communities with drilling and reserve the remainder for environmental or infrastructure projects.

While he was optimistic that the measure "definitely" can be approved this month alongside the state budget, Mr. Scarnati's staff gave a more cautious forecast.

"It doesn't mean it gets done, but we are going to push the issue," Mr. Crompton said.

Copyright (c) 2011, Pittsburgh Post-Gazette

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