What you need to know: Pennsylvania Marcellus Shale regulations and impact fee
Pipeline | Feb. 6, 2012
By Amy Friedenberger
After months of discussion, Gov. Tom Corbett and Republican lawmakers who hold a majority in both legislative chambers, reached a tentative deal on a Marcellus Shale regulatory and impact fee measure. Action on the plan is expected to begin today, reports the Post-Gazette's Laura Olson. Senate President Pro Tempore Joe Scarnati wanted to get the shale bill passed before Mr. Corbett unveils his budget plan tomorrow.
Several memos and versions have been floating around Harrisburg. One memo went to House Democracts, who were excluded from Marcellus Shale negotiations.
Here's a breakdown of what is expected to be in the bill:
-- Counties can adopt an ordinance to impose a fee on wells within their boundaries. But if a majority of municipalities request a fee, it will be enforced regardless of the county's decision.
-- Drillers will pay a fee to the state Public Utility Commission, which will distribute the revenues. The fee will be assessed according to the "spud" date, or the start of drilling.
-- Distribution of the fee revenues hasn't been finalized, but are expected to be similar to past versions of the bill, with money going to areas affected by drilling, such as infrastructure, and the rest going to statewide projects. Another confirmed component: 5 percent of the state's portion would be eligible to encourage the creation of ethane cracker and refinery facilities.
An ethane cracker breaks down liquid gas compounds from the "wet" gas that is common in the state's southwest into ethylene, a raw material used to make plastics. A chemical plant would boost the value of Marcellus Shale gas and create jobs.
-- Over 15 years, the fee would raise between $190,000 and $355,000 per well, depending on how natural gas prices rise and fall. It also would be subject to adjustments based on the consumer price index.
This is both good news and bad news for drilling companies. Natural gas is at a record-low price. So while drilling companies will pay a smaller fee per well if natural gas is at a low price, they will also have a hard time turning a profit when there is a low demand for natural gas that comes from a well that cost millions to construct.
-- In terms of enhancing environmental regulations, the bill is expected to include an increase in well-bonding amounts, increase in penalties for violations, and requirement for drilling companies to disclose what chemicals are being used in hydraulic fracturing and posting of inspection reports.
-- Language includes restricting municipalities' ability to zone and regulate Marcellus Shale drilling, which would in effect prevent municipalities from implementing their own sort of moratorium on drilling.
In a letter to House and Senate last week, Mr. Corbett reinforced his position of setting up parameters for local rules and having a review system by the state attorney general or other entity. Mr. Corbett and driller companies call for consistency in zoning regulations.
"It is paramount that the final legislation under your consideration contains uniform standards that balance the high regard we hold for local governance in Pennsylvania with the predictability and consistency that any business needs to grow and thrive," Mr. Corbett said in the letter.
In the past, drilling companies would go head-to-head with townships establishing their own regulations to ban drilling,such as South Fayette, which Range Resources sued last year.
The bill will likely force municipalities to:
By Amy Friedenberger
After months of discussion, Gov. Tom Corbett and Republican lawmakers who hold a majority in both legislative chambers, reached a tentative deal on a Marcellus Shale regulatory and impact fee measure. Action on the plan is expected to begin today, reports the Post-Gazette's Laura Olson. Senate President Pro Tempore Joe Scarnati wanted to get the shale bill passed before Mr. Corbett unveils his budget plan tomorrow.
Several memos and versions have been floating around Harrisburg. One memo went to House Democracts, who were excluded from Marcellus Shale negotiations.
Here's a breakdown of what is expected to be in the bill:
-- Counties can adopt an ordinance to impose a fee on wells within their boundaries. But if a majority of municipalities request a fee, it will be enforced regardless of the county's decision.
-- Drillers will pay a fee to the state Public Utility Commission, which will distribute the revenues. The fee will be assessed according to the "spud" date, or the start of drilling.
-- Distribution of the fee revenues hasn't been finalized, but are expected to be similar to past versions of the bill, with money going to areas affected by drilling, such as infrastructure, and the rest going to statewide projects. Another confirmed component: 5 percent of the state's portion would be eligible to encourage the creation of ethane cracker and refinery facilities.
An ethane cracker breaks down liquid gas compounds from the "wet" gas that is common in the state's southwest into ethylene, a raw material used to make plastics. A chemical plant would boost the value of Marcellus Shale gas and create jobs.
-- Over 15 years, the fee would raise between $190,000 and $355,000 per well, depending on how natural gas prices rise and fall. It also would be subject to adjustments based on the consumer price index.
This is both good news and bad news for drilling companies. Natural gas is at a record-low price. So while drilling companies will pay a smaller fee per well if natural gas is at a low price, they will also have a hard time turning a profit when there is a low demand for natural gas that comes from a well that cost millions to construct.
-- In terms of enhancing environmental regulations, the bill is expected to include an increase in well-bonding amounts, increase in penalties for violations, and requirement for drilling companies to disclose what chemicals are being used in hydraulic fracturing and posting of inspection reports.
-- Language includes restricting municipalities' ability to zone and regulate Marcellus Shale drilling, which would in effect prevent municipalities from implementing their own sort of moratorium on drilling.
In a letter to House and Senate last week, Mr. Corbett reinforced his position of setting up parameters for local rules and having a review system by the state attorney general or other entity. Mr. Corbett and driller companies call for consistency in zoning regulations.
"It is paramount that the final legislation under your consideration contains uniform standards that balance the high regard we hold for local governance in Pennsylvania with the predictability and consistency that any business needs to grow and thrive," Mr. Corbett said in the letter.
In the past, drilling companies would go head-to-head with townships establishing their own regulations to ban drilling,such as South Fayette, which Range Resources sued last year.
The bill will likely force municipalities to:
- Complete permit reviews within 30 days.
- Allow natural gas wells to operate in all zones, including residential.
- Keeping drilling regulations consistent with other industrial zoning, meaning a municipality can't discriminate between noise from drilling processes and another factory in the area emitting the same level of noise.
- Give PUC the authority to review local zoning regulations to determine whether they are reasonable based on guidelines to be outlined in the bill.
