House Natural Gas Plan Includes Longer Period of Fees

By Caleb Taylor | PA Independent

Building on momentum for a natural gas tax or fee, a new proposal seeks higher fees paid by natural gas drillers in Pennsylvania for a longer period of time.

“I think that before we look to cut off a fee at year 10, we really need to learn more about these wells and their production,” said state Rep. Marguerite Quinn, R-Bucks, who introduced the bill. “Let’s not just give this (resource) away, and let’s not be punitive.”

Her proposal, which has bipartisan support in the state House, is a response to a similar plan in the state Senate. Quinn’s plan would charge drilling companies $50,000 per well each year for the first two years of operation. The fee then would decrease by $5,000 every two years, until bottoming out at $10,000 for the 21st year and every year of production thereafter. There are no adjustments in Quinn’s plan for the level of production or the price of gas. 

The state House fee structure differs from the impact fee plan presented by state Senate President Joe Scarnati, R-Jefferson. In particular, his plan does not charge a fee after a well’s 10th year in operation.

Natural gas wells typically see 80 percent of their production in the first 10 years of operation.

Quinn’s proposal, HB 1700, provided a breakdown of how the revenue from the fee would be divided. Fifty percent of revenue would go to local governments, five percent to county conservation districts, 25 percent to both the state Environmental Stewardship Fund and the state Hazardous Site Cleanup Fund and 20 percent to the state Motor License Fund for infrastructure.

“Taxing the Marcellus shale is not going to do any good for the environment if we run the revenue through the general fund and spend it on everything from the arts to the zoos,” said state Rep. Dan Truitt, R-Chester.

According to Quinn’s projections, it would raise revenue of nearly $170 million in 2011 and increase yearly to more than $600 million annually by 2020.

Environmental groups unenthusiastic about Scarnati’s impact fee plan saw HB 1700 as an improvement.

“Quinn might have actually hit the sweet spot here,” said Jan Jarrett, president and chief executive officer of the Harrisburg-based environmental lobbying firm PennFuture. “It has a really important component in that it provides money for the Environmental Stewardship Fund and the Hazardous Cleanup Fund.”

The Environmental Stewardship Fund pays for “green” infrastructure projects, and the Hazardous Cleanup Fund covers some of the costs of environmental disasters, such as cleaning acidic drainage from old coal mines.

The drilling industry has remained open to paying an impact fee, but has not endorsed any particular proposal.

An impact fee differs from a severance tax, because it is based on a flat rate, and the revenue is directed to specific costs created by the natural gas industry, rather than used to fund state government. A severance tax is applied to an industry that removes natural resources and usually is applied based on the value of the resources removed.

Quinn’s impact fee bill also garnered bipartisan support as a result of its differences from the impact fee legislation currently going through the state Senate.

The state House Republican leadership has opposed impact fee legislation being included in the state budget that is due June 30, and Quinn’s bill won’t change their position.

“The governor’s Marcellus commission is still doing its work, and we are waiting to see what they are doing,” said Steve Miskin, spokesman for state House Majority Leader Mike Turzai, R-Allegheny. 

Gov. Tom Corbett’s Marcellus shale commission was formed to study the impact of natural gas drilling companies on the state. Its findings are due July 22.