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Senate and Others Debate Gas Drilling Fee

A proposed gas impact tax bill was amended last week and sent to the Pennsylvania senate floor. The debate on SB 1100, proposed by Sen. Joe Scarnati (R-Tioga) and co-sponsored by Sen. Gene Yaw (R-Lycoming), goes well beyond the senate, however, as local authorities and gas drilling advocates ponder the implications of the “model ordinance” element of the legislation that may prevent some municipalities from receiving funds that are earmarked for maintenance of infrastructure, such as roadways, water, and sewer that can be affected by drilling and pipeline operations. If approved, even a democratic senator from Chester County in southeastern Pennsylvania wants a piece of the projected $100-million annual intake to offset training of firefighters there in the event of incidents concerning natural gas pipelines that will run through the area.

A bill proposed earlier by Yaw, SB 744, would lead to a revamping of existing tax laws to ensure that school districts, many of which are already suffering from projected state budget cuts, would get some relief. According to information released by Yaw’s office, SB 744 would seek to give local governments a stake in their own decision-making with regards to the industry.

“My proposal is to bring gas wells back under the pre-2002 assessment laws,” Yaw explained. “The evaluation is made by the county, and they levy a tax based on what the assessment is. In that vein, school districts would be the primary beneficiaries.”

In a press release, Yaw further noted, “As a real estate interest, the value of the gas well would be determined according to the law in the same manner as any other real estate interest in Pennsylvania, such as hotels, mini markets, shopping malls, industrial properties, and homes. This bill is the only pending legislation which would allow school districts to directly benefit from the gas industry.”

In a phone interview, Yaw expressed surprise that county commissioners and school board members interested in maintaining the tax base haven’t become more involved or shown more support for the measure.

Towanda Area School District Superintendent Diane Place admitted that she knew very little about SB 744, but stated that she would favor any law that benefits local residents, businesses, social services, police, firefighters and schools.

“We are serving many more people in our communities without the added benefit of any additional revenue,” she stated. “Many of the (gas company) employees are not residents of Pennsylvania, and there is no way to generate revenue to support burdened entities.”

Part of the ambiguity may be attributed to the fact that the two bills mentioned here are among numerous pieces of legislation aimed at garnering greater control of an industry that has swept the state by storm. The sheer volume of legislation under consideration has proven both confusing and frustrating for local lawmakers and concerned residents.

“What kind of person who supposedly loves our state well enough to become a senator would propose legislation such as this?” Towanda resident Diane Siegmund remarked in reference to the Scarnati bill and the stipulation that boroughs and townships may not override the “model ordinance” with zoning restrictions that suit their specific needs. “If we take the fee, we lose all of our rights in terms of siting, noise, and destruction of roads. It’s a takeover of government by industry.”

“This would not stop municipalities from adopting stronger ordinances, but it would leave them out of the money,” stated 110th district Pennsylvania representative Tina Pickett as to her understanding of SB 1100. “I am also told that, if a municipality adopts an ordinance more stringent than the state’s Oil and Gas Act, they run the risk of being overturned in court.”

“I think that is a reasonable compromise to keep the majority of funds local,” said Yaw in defense of the measure. “Senator Scarnati has said that his bill is a ‘starting place.’ His thought is that local municipalities cannot have it both ways. You can’t ban drilling or make it so difficult that it won’t happen, but take the money produced by drilling.”

Yaw acknowledges the controversy over the legislation, but he contends that there is room and plenty of time for debate on the bill, which the governor will not likely consider until he receives a final report on the measure from the Marcellus Shale Commission (MSC), which has already voiced its opposition to it.

“Any new fee, adding to the taxes and fees already applicable to the industry and its employees, must not create an uncompetitive climate for growth and stunt the tremendous benefits already accruing to the commonwealth and its residents from responsible shale gas development,” stated MSC president Kathryn Klaber.

Yaw related that the bulk of SB 1100 was a compromise between lawmakers and representatives of the gas industry, a notion that also rubs anti-drilling advocates the wrong way. The “model ordinance” reached by these seemingly odd bedfellows more or less indicates that oil and gas development would be permitted everywhere, except residential districts; compressor stations would be granted “permitted use” in most agricultural, industrial, and residential districts, and natural gas processing plants would be allowed in industrial districts and some agricultural districts. Local municipalities would not be able to restrict hours of operations; impose noise, light, and height restrictions, or impose restrictions on vehicular access routes for overweight vehicles, except in compliance with the state’s Municipal Planning Code and Pennsylvania Vehicle Code.

The reference to residential districts, Yaw noted, includes small villages out in the country that are not incorporated as towns or boroughs. “You can’t have a drilling pad in an area like that, but that doesn’t mean that you can’t drill under them,” he added.

The state senate will likely begin debating senate bills 744 and 1100 in the coming weeks, but Yaw does not expect imminent action on either piece of legislation, as the state is still focused on balancing a budget for the coming fiscal year.

“Right now, there is no movement as far as doing anything that has an impact. Nothing is stopping the house or senate from moving on anything, but I’m not sure that it’s a beneficial thing to do,” he stated. Whether or not a version of either of the bills comes to pass in 2011, Yaw added, “I don’t think that any of these proposed fees will have an impact on this year’s budget.” He does hope and expect that the impending legislation will make its mark “somewhere down the road.”

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