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Legislators want adequate tax share for municipalities fiscally hit by gas drilling.

STEVE MOCARSKY smocarsky@timesleader.com

Much legislation has been written recently to address concerns about natural gas drilling into Pennsylvania’s Marcellus Shale, but little has been signed into law.

And one issue, it seems has been overshadowing and holding up action on all the others: a state severance tax on natural gas extraction.

Several bills addressing a severance tax have been put forward by state legislators, and Gov. Ed Rendell also has proposed implementing such a tax.

“The biggest concern for legislators is that an adequate portion of a severance tax would come back to local governments that are financially impacted by drilling activities,” said Adam Pankake, representing Sen. Gene Yaw, a Republican from Lycoming County and one of the few legislators to have a Marcellus-related bill he sponsored signed into law.

Senate Bill 325, sponsored by Rep. Anthony Melio, D-Levittown, didn’t muster much support in the House because it authorized an 8-percent severance tax, all of which would go to the state’s General Fund, Pankake said.

State Sen. Raphael Musto, D-Pittston Township, proposed a severance tax plan in Senate Bill 905 that mirrors Rendell’s plan, directing all proceeds of a 5-percent tax and a 4.7-cent charge on every 1,000 cubic feet of gas extracted into the General Fund.

A bill by state Rep. Bud George, chairman of the House Environmental Resources and Energy Committee, would send only 60 percent of a 5-percent tax to the General Fund.

The remainder would be divvied up, sending 15 percent to the Environmental Stewardship Fund; 9 percent split evenly between counties and municipalities in which wells are drilled; 5 percent to the Liquid Fuels Tax Fund; 4 percent split evenly between the Game and Fish and Boat commissions; 4 percent to the Hazardous Sites Cleanup Fund; and 3 percent to a program to help low-income residents with heating bills.

A bill sponsored by Sen. Andrew Dinniman, D-West Chester, would send half of a 5-percent severance tax to the General Fund. Another 44 percent would be split evenly between the Environmental Stewardship Fund and municipalities in which a well was drilled; the remaining 6 percent would be split between the Game and Fish and Boat commissions.

Legislators are also considering severance tax models used in other states, such as a phase-in approach used in Arkansas, Pankake said.

Marcellus-drilling industry advocates describe it as a fledgling industry that a severance tax could cripple because of the financial resources needed to build a pipeline infrastructure where none previously existed.

Matthew Maciorski, spokesman for state Rep. George, D-Clearfield County, said severance tax legislative proposals have been “coming in fast and furious. Everyone has their own take on how the revenue should be divided.”

Maciorski said Marcellus Shale issues are “very complicated and integral to the whole budget debate.”

Some legislators use some pieces of legislation as bargaining chips in negotiations with the gas industry. For example, the industry doesn’t support a severance tax, but the industry is pushing for a law authorizing forced pooling – compelling landowners who don’t wish to lease their mineral rights to be part of a drilling unit with others that do.

“Sometimes there are alliances that have to be built. &hellip Sometimes we rely on members to tell us when it’s time to strike. It gets complicated going between the House and the Senate. Members want to have all their ducks in a row to prevent there being (additional delays) in the process,” Maciorski said.

Bob Kassoway, director of the House Finance Committee for the Democratic Caucus, said any severance tax bill will likely be passed as part of the 2010-11 state budget, and it’s likely that little if any other Marcellus-related legislation will be passed until that happens.

Sen. Yaw was pleased that Act 15 was signed into law on March 22. Based on his Senate Bill 297, it repeals five-year confidentiality for gas production financial records and requires well operators to submit semi-annual reports to the state. It also requires the state Department of Environmental Protection to post well data online.

But while the debate continues over the severance tax, legislation on issues important to lease holders, to residents with environmental concerns and to members of the gas industry continue to languish in the House or Senate or their committees.

In addition to severance tax legislation, there are at least four Marcellus-related Senate bills and at least 17 House bills pending.

For example, legislators are holding off a vote on Rep. Bill DeWeese’s House Bill 10, which would enable counties to assess value to gas and oil for taxation purposes, likely because it hasn’t been decided what – if any – percentage of a severance tax will go to counties.

Introduced 16 months ago, House Bill 297 remains in the House Transportation Committee. Sponsored by Rep. Mark Longietti, D-Hermitage, it would require the state Department of Transportation to publish by the end of the year a revised schedule of bonding amounts for roads damaged by heavy truck traffic and to update the amount at least every three years.

PennDOT last revised the schedule in 1978, Longietti said, leaving officials in municipalities damaged by drilling trucks with insufficient guaranteed funding to repair their roads.

Rep. George’s House Bill 2213, which increases bonding amounts for wells, boosts the number of required well inspections by DEP and adds protections for water supplies, has gained much local support. But after an amendment in the House Environmental Resources and Energy Committee in May, it was re-committed to the House Appropriations Committee.

Sen. Lisa Baker, R-Lehman Township, announced in May she is working on a series of bills to provide additional protections to drinking water sources that could be harmed by drilling.

State Rep. Karen Boback, R-Harveys Lake, issued a statement last week stating that she also was working to develop legislation to protect drinking water from gas drilling practices.

Painfully aware of the slow legislative pace in Harrisburg, Boback is urging the governor to issue an executive order implementing additional protective rules before more well-drilling permits can be issued.

Copyright: Times Leader

NJ-based Delaware River Basin Commission places unnecessary moratorium on Marcellus production, denying economic benefits, jobs to Pennsylvanians

It’s hard to imagine President Kennedy had the denial of jobs and revenue for residents of Pennsylvania in mind when he signed a bill in 1961 creating the Delaware River Basin Commission (DRBC). But nearly a half-century later, the DRBC of today bears little resemblance to the compact established almost five decades ago — one that was put in place to promote economic growth by providing a mechanism for equitable distribution of the Delaware’s waters.

Today, unlike similarly structured, intergovernmental bodies – such as the Susquehanna River Basin Commission (SRBC) – the DRBC is working aggressively to shut down any and all natural gas exploration that may take place, now or in the future, in the eastern portion of the Marcellus Shale.

This week, following the decision last month to ban new shale permits in the area, the West Trenton, N.J.-based organization took additional steps to bring responsible Marcellus Shale natural gas production to a standstill by putting forth a de facto moratorium. How’d it do that? Easy: DRBC simply gave itself the authority to unilaterally freeze exploratory Marcellus production wells in the basin altogether.

Well aware of exactly what’s at stake, the Marcellus Shale Coalition (MSC) wasn’t bashful in telling the Philadelphia Inquirer what it thought of the DRBC decision:

Kathryn Klaber, executive director of the Marcellus Shale Coalition…said extending the temporary ban on new permits to include exploratory wells only added “layers of unnecessary red tape” without any environmental benefit.

“The DRBC’s decision to deny Americans the benefits of clean-burning, job-creating natural gas from the Marcellus Shale is misguided and unfortunate,” she said. New technologies, she added, are reducing the overall water usage and land disturbance.

“At the same time, this production is creating tens of thousands of jobs and delivering affordable, clean-burning energy to struggling families and small businesses. Our hope is that the DRBC will recognize this fact and act accordingly, putting commonsense solutions and policies ahead of agendas,” she said.

Safely producing clean-burning natural gas from the Marcellus Shale in Pennsylvania remainsa powerful job creation engine. In fact, according to a recently updated Penn State University economic impact study, this tightly regulated production is projected to create nearly 212,000 jobs over the next decade.

Many in Pennsylvania understand how important this opportunity is for the Commonwealth, especially in regions of the state facing high unemployment and ongoing economic struggles. And like the MSC, supporters of environmentally safe natural gas production understand how critical it is to get this right, balancing commonsense environmental safeguards with the economic opportunities before us.

Here’s what one northeastern Pennsylvania natural gas advocate told the Associated Pressabout safely developing these abundant, domestic and clean-burning resources near the Delaware River basin:

Energy companies have leased thousands of acres of land in Pennsylvania’s unspoiled northeastern tip, hoping to tap vast stores of gas in a sprawling rock formation — the Marcellus Shale — that some experts believe could become the nation’s most productive gas field.

Plenty of folks like Matoushek are eager for the gas, and the royalty checks, to start flowing — including farmers who see Marcellus money as a way to keep their struggling operations afloat.

“It’s a depressed area,” Matoushek said. “This is going to mean new jobs, real jobs, not government jobs.”

Adding new and unnecessary layers of burdensome regulations and red tape – aimed at halting job-creating Marcellus Shale natural gas production – will not help deliver more affordable supplies of homegrown energy. The DRBC’s shale gas moratorium will not help drive down our dependence on unstable regions of the world to keep our economy fueled, nor will it help create jobs at a time when they’re most needed. Quite the opposite, in fact.

Copyright: Marcelluscoalition.org

Canonsburg, Pa. – Today, the Pennsylvania Independent Regulatory Review Commission (IRRC) passed a new rule mandating an “end of pipe”, 500 milligrams per liter cap on the concentration of total dissolved solids (TDS) in the disposal of produced water from natural gas production.

Kathryn Klaber, president and executive director of the Marcellus Shale Coalition (MSC), issued this statement about the new rules, which have been sought by the Pennsylvania Department of Environmental Protection (DEP):

“There is not a single water treatment facility in Pennsylvania that could meet this unreasonable benchmark, which will not provide any additional environmental benefit.

“Our industry is working aggressively and constantly to improve our water management practices, as one of our top priorities has been and remains the protection of our rivers, lakes, streams and tributaries. In fact, MSC members are now recycling nearly 60 percent of the water from this process. Many are recycling almost 100 percent of their water, thanks to new technologies and the unwavering commitment to environmental protection.

“There is a need for commonsense regulations that encourage the production job-creating natural gas throughout the Commonwealth and aim to keep our water clean. Unfortunately, these rules will make responsible shale gas development more difficult, and the jobs and economic benefits created throughout this process less likely, without positively impacting Pennsylvania’s water quality.”

NOTE: San Pellegrino Mineral Water’s TDS concentration is nearly twice the level of what these regulations would require.

Copyright: Marcelluscoalition.org

EILEEN GODIN Times Leader Correspondent

HARVEYS LAKE – Resident Michelle Boice on Tuesday night asked that borough council take an active role in slowing down natural gas drilling activity.

She cited the incident near Clearfield, Pa., as an example of what could happen. In that western Pennsylvania incident, a gas well in an uninhabited area blew out, spewing drilling mud and natural gas for hours before it was brought under control.

She detailed the long road the borough and residents have traveled to maintain and keep Harveys Lake clean, and cited how the state Department of Environmental Protection refuses to give out any more sewer permits and will not allow a resident to build a dock because of a “certain type of micro organism is living there.”

“But they approved three gas drilling permits in Lake Township, Lehman Township and Noxen,” Boice said. “All within two miles of Harveys Lake.”

Council Vice President Larry Radel told Boice he has been in contact with state Rep. Karen Boback and state Sen. Lisa Baker regarding the gas drilling.

“I have been gathering information,” Radel said. “I am trying to push for state help.”

In other matters, an update of the borough’s comprehensive plan and storm water basin inspections were approved and two new part-time police officers were hired.

With $60,000 from a Community Development grant in their pockets, council approved Wilkes-Barre engineering firm Michael J. Pasonick Jr. and Associates to help conduct studies to update the municipality’s comprehensive plan.

The current plan is dated 1974 through 1990. Council President Fred Kopko said it covers subjects such as traffic studies, projection of population, vacant land, housing, economic and transportation goals.

It serves as a guide to what is currently in the borough and how it might continue to grow, he said.

Council member Rich Williams III announced that during the next few weeks, storm water basins will be inspected and repairs made as needed by the borough’s road crew. The crew has a map and a schedule to visit each basin, but if residents know of one that is severely damaged they can contact Williams through the borough office.

Two part-time officers, Gina Kotowski and Jared Kittle, were hired, at $13.75 per hour, to cover shifts during other officers’ summer vacations.

Copyright: Times Leader

State DEP chief warns gas companies to put end to well blowouts and water pollution.

MARC LEVY Associated Press Writer

HARRISBURG — Serious consequences await the state’s rapidly growing natural gas industry if companies are caught cutting corners of safety measures to pump up profits, Pennsylvania’s top environmental regulator warned Wednesday.

Environmental Protection Secretary John Hanger told a state Senate committee that companies flocking to Pennsylvania to exploit the rich Marcellus Shale natural gas reserve must stop well blowouts, gas migration and water pollution.

He said he has seen examples of negligence and accidents and cited his agency’s actions to withhold new permits, stop a company’s operations or seal wells when safety is compromised.

“We need this industry to get the message from us that we expect that safety is not going to be sacrificed when those decisions have to be made, and there will be serious consequences” if it is, Hanger said.

Hanger spoke on the heels of two high-profile natural gas well accidents, one in Pennsylvania and one in West Virginia.

The Senate Environmental Resources and Energy Committee hearing was held as a result of a well blowout in Clearfield County earlier this month that spewed natural gas and wastewater into the air for 16 hours before it was brought under control.

It was incredibly lucky that a nearby engine did not ignite the gas and cause an explosion or fire, Hanger said.

Hanger declined to reveal the results so far of the investigation into the June 3 blowout, though he repeated criticism Wednesday of the apparently botched attempted by the company, EOG Resources, to get in contact with his agency’s emergency response hotline.

On another matter, he told senators that his agency found no violations after inspecting several Pennsylvania wells being drilled by Union Drilling, the contractor that was drilling a West Virginia well that caught fire three days after the blowout.

Hanger’s 90 minutes of testimony came a day before a state board is to vote on proposed new standards that he views as crucial to protecting public waterways from briny and chemical-laden drilling wastewater.

Copyright: Times Leader

Group urges commonsense reforms, dialogue aimed at safely expanding natural gas development, jobs in Pa.

Canonsburg, Pa. – The Pennsylvania state House of Representatives is currently considering what would be the nation’s most onerous taxes on the environmentally responsible development of clean-burning, job-creating natural gas from the Commonwealth’s Marcellus Shale formation. Kathryn Klaber, president and executive director of the Marcellus Shale Coalition (MSC), issued this statement:

“Pennsylvanians continue to face troubling economic times, with nearly one out of every ten citizens in the Commonwealth out of work today.

“Despite this difficult climate, the environmentally-safe development of the Marcellus Shale’s natural gas resources continues to create tens of thousands of good-paying jobs at a time when they’re most needed. This responsible development is not only generating hundreds of millions of dollars in tax revenue for state and local governments, but it’s also delivering clean-burning, homegrown energy supplies to struggling families in the form of affordable natural gas for home and water heaters, as well electricity.

“We will continue to work closely with the General Assembly, the governor and his administration, as well as county and local officials, to craft commonsense solutions – especially modernizing our outdated regulatory framework – that encourage competitiveness, expanded job creation and energy security.

“Unfortunately, this enormous tax hike and misguided call for blanket moratoriums on shale gas production not only put Pennsylvania on a path to become one of the least competitive energy-producing states in the country but also threatens critical capital investments, which are essential for continued job growth. Instituting new taxes and an unnecessary moratorium will only drive away jobs – what a missed opportunity that would be.”

Copyright: Marcelluscoalition.org

State county commissioners association is working to broaden taxing authority.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

Counties, municipalities and school districts aren’t seeing any significant tax revenue related to Marcellus Shale development under current tax law.

But the County Commissioners Association of Pennsylvania is working to change that, lobbying for legislation that would give those governmental bodies property taxing authority on natural gas similar to taxes levied on coal extraction.

“We have to have the assessment law changed. The reason (is that) other minerals are assessed. It’s not fair to the other mineral (extraction companies) and it’s not fair to the rest of the taxpayers who have to pick up the burden of their exemption,” association Executive Director Douglas Hill said of natural gas and oil companies.

Hill said the state Supreme Court in 2002 ruled that counties had no statutory authority to tax oil and gas because state assessment law specifically includes coal but makes no mention of oil or gas.

Since that time, oil and gas interests have been escaping local property taxes, which had been paid in oil and gas-producing counties since at least the early 1900s, according to a position paper released by the association.

“Producers of other minerals such as coal and limestone already pay their fair share of the property tax. Counties support reversing the Supreme Court’s 2002 decision to assure that oil and gas companies contribute their share to the local tax base as well,” the paper states.

Hill said House Bill 10 of 2009, sponsored by state Rep. Bill DeWeese, D-Greene County, would restore property tax assessment authority on oil and gas.

The levy proposed in the bill would apply only to proven wells. “If there’s nothing to be extracted or (the gas) can’t be extracted, then there is no value,” Hill said.

Hill said there is, of course, opposition to the bill from the oil and gas industry. But he pointed out that other oil and gas producing states assess oil and gas extraction. Hill also said that large, multinational companies involved in Marcellus Shale exploration already had payment of such a tax built into their business plans and were surprised to learn that Pennsylvania counties can’t assess natural gas extraction.

Another association position paper points out several ways local communities are impacted by Marcellus Shale exploration that justify taxation.

“Some of the most visible impacts have been to township roads, county bridges and other infrastructure as developers bring drilling rigs, construction equipment and truckloads of water to and from drilling sites. &hellip Hotels might be filled with workers associated with Marcellus, impacting both the tourism industry and the county hotel tax,” according to the paper.

“Workers from out of state and their families have utilized social services such as drug and alcohol treatment and children and youth services. County jails, county probation and law enforcement have been affected. Even county recorder of deeds offices are affected, flooded by title searchers confirming ownership of subsurface rights,” the paper states.

House Bill 10 is still in the House Finance Committee for consideration.

“We’ve been working on getting agreement to move on it. We want to have things in place for a vote in the House and prepare for going to the Senate. We’ve also been working on an introduction of a bill in the senate,” Hill said.

Generally, legislators understand the issue, Hill said, but it “gets confusing at times because they are looking at a state severance tax,” and the county and local taxation issue “gets tied up in all the other issues related to the Marcellus,” he said.

Currently, there are at least five Senate bills and at least 17 House bills pertaining to Marcellus Shale exploration as well as one House bill, two senate bills and a budget proposal from Gov. Ed Rendell that address the imposition of a severance tax, according to information provided by state Sen. Lisa Baker, R-Lehman Township.

In the meantime, county assessors are waiting for some legislative determinations.

Luzerne County Assessor’s Office Director Tony Alu feels pretty confident that legislation eventually will be adopted and that the county will see some tax revenue from natural gas extraction.

Alu said assessors from various counties had been discussing among themselves various taxation formulas that would be most appropriate to tax natural gas extracted.

“We’re waiting on the state to make a determination so that we can all be uniform. &hellip We just want to make sure we’re doing the right thing,” Alu said.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

Gov. says drilling industry’s top issues will be dealt with separate from taxes.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania’s Legislature is a place where victory almost always arrives in the form of a hard-won compromise, and the state’s rapidly growing natural gas industry may be about to discover that.

So far, the industry has been successful in dodging efforts by Gov. Ed Rendell and many Democratic lawmakers to slap an extraction tax on the methane they pump from the rich Marcellus Shale reserve that lies underneath much of the state.

But the drilling companies will need help from those adversaries in addressing a wish list of changes in state laws they are seeking to make it easier for them to pursue the gas.

Paying a tax just might be the price.

“What we’ve said all along is that the conversation begins and ends with the extraction tax,” said Brett Marcy, a spokesman for House Majority Leader Todd Eachus, D-Butler Township . “We cannot even begin to seriously discuss some of the issues that the natural gas industry wants us to take action on until we get the necessary support for a natural gas extraction tax.”

The Rendell administration says the industry’s top issues — such as a law that could limit municipal zoning authority over where drilling can occur — will be dealt with separate from the pursuit of a tax.

“Those are apples and oranges in some respects,” said Rendell’s chief of staff, Steve Crawford. “We’re not willing to say, ’We will roll local governments in this state if you support a tax.”’

But Dave Spigelmyer, a Chesapeake Energy Corp. executive who is also vice chairman of the Marcellus Shale Coalition, said the administration has told the industry group that a discussion of drilling issues will include talking about a tax.

For now, talk is in the early stages and industry-backed legislation that encompasses the wish list has not been introduced.

Two of the top issues could be controversial.

One would essentially outlaw a municipality from using zoning to prevent the collection of gas from below the property of someone who wishes to sell it — a change opposed by the Pennsylvania State Association of Township Supervisors.

Municipalities “have the ability to properly zone different activities within the jurisdictions. With the industry being able to drill horizontally up to a mile, why do they need to have zoning done away with?” asked Elam Herr, the association’s assistant executive director.

The other would allow a state authority to force a holdout landowner into a pool with neighbors who wish to sell their mineral rights in a block to a drilling company.

The state would decide how the holdout is to be compensated for the gas, based on the agreements between the willing landowners and the company.

Copyright: Times Leader

Copyright: Times Leader