Lawmakers and Gov. Edward G. Rendell set an October 1 deadline for approval of an extraction tax on natural gas drilling in the Marcellus Shale. To date, no specifics of the plan have been agreed to.
“Everything is still up in the air,” said Terry Bossert, vice president of government relations for Chief Oil & Gas, one of the largest natural gas drilling companies working in Pennsylvania. “The rate of the tax, how the revenue is divided … everything.”
The parties negotiating the plan will extend beyond lawmakers and the drilling industry. Local government officials are pushing for a percentage of the revenue and are looking to protect their local zoning laws.
“We have major infrastructure needs we have to take care of because of the increased use of our roads and other systems,” said Elam Herr, the assistant executive director of the Pennsylvania State Association of Township Supervisors. “And we want to have a guarantee that our local zoning ordinances aren’t usurped by the state for the drillers.”
Some environmental groups, on the other hand, prefer that all tax receipts go toward oversight and enforcement.
“The number one priority is the safe economic development of shale,” said Jack Ubinger, senior vice president of the Pennsylvania Environmental Council, which recently released a proposed regulatory framework for drilling in the shale. “To that end, we feel as much of the resources as possible should go to oversight.”
Complicating talks further, the drillers insist that other legislative initiatives, favored by industry, be included in the negotiations.
Kathryn Klaber, president and executive director of the Marcellus Shale Coalition, said that lawmakers should not set the tax in a vacuum.
“It needs to be part of a comprehensive evaluation of the laws and regulations governing the industry,” Klaber said.
Some of the legislative initiatives include the following: so-called pooling of land where the owners of land with no lease agreement contiguous to parcels with agreements would be paid the same royalties as the owners of the leased land; another proposal would allow more than one well on a pad; a third would clarify jurisdictional issues between local governments and the state Department of Environmental Protection.
“Some local government are working very well with the drillers,” said one industry source. “Others are using whatever local laws that have to slow development down as much as they can.”
Rendell based his tax proposal, first introduced in February 2009, on a West Virginia tax — an effective 6.2 percent rate at the wellhead. In June, the House approved a different version of tax. The base and beginning tax rate would be 35 cents for every 1,000 cubic feet of gas recovered.
The tax rate would be adjusted once a year based on the previous 12-month average of natural gas prices.
Revenue from the tax will be distributed as follows:
• 50 percent to the General Fund.
• 20 percent to a Local Government Services Account.
• 15 percent to the Environmental Stewardship Fund.
• 3 percent to the Conservation District Fund.
• 3 percent to the Fish & Boat Commission.
• 2 percent to the Game Commission.
• 2 percent to the Low Income Home Energy Assistance Program, LIHEAP.
• 2 percent to the Hazardous Sites Cleanup Fund.
• 2 percent to the Oil & Gas Environmental Disaster Recovery Account.
• 1 percent to low-head dam removal and reconstruction projects.
— J.L.K. •