To Fee or Not to Fee

Date: September 15, 2011

Members of the PA House of Representatives’ Finance Committee heard testimony Tuesday at Warren Holiday Inn regarding the possibility of a natural gas impact fee.

Article orginally published on September 14 in the Times Observer.

A fee.

A fee with limits.

No fee at all.

Members of the Pennsylvania House of Representatives’ Finance Committee heard testimony Tuesday at Warren Holiday Inn regarding the possibility of a natural gas impact fee. The gathering was hosted by Rep. Kathy Rapp (R-65) with the goal of collecting information of use to them as they work on legislation regarding Marcellus Shale natural gas development.

“I feel an impact fee would be nothing more than a penalty on the producer… passed on to the consumer,” concerned citizen Stewart VanOrd said. “If an impact fee is enacted, it should be to protect the environment for future generations.”

Craig Mayer of the Marcellus Shale Coalition cited a number of studies from sources including Penn State University and the University of Pittsburgh during his presentation. “Production is continuing its rapid rise,” Mayer said. “The economic benefit are occurring broadly across the local community. Development has not had a major impact on municipal governments.”

He asked the lawmakers to “be very careful not to stifle and discourage” the burgeoning industry.

“Any discussion regarding an impact fee should begin with the acknowledgment that… the industry is taking care of all the impacts…,” Pennsylvania Independent Oil and Gas Association Vice Chairman Sam Fragale said. “Roads are often being improved before drilling activity begins. We are out there working with the landowners to restore their properties.”

“Taxes are flowing to all levels of government,” Fragale said, while the industry creates “high-paying, family-sustaining jobs.”

Rapp said her constituents are concerned that natural gas is being shipped to China and other overseas destinations.

Mayer said he is not aware of extensive overseas exporting. “Where the gas goes… is predominantly to the northeast,” he said.

Rapp also questioned Mayer and Fragale about the possibility that oil and gas development causes water quality problems.

Mayer said that, after more than 150 years of drilling in the region, U.S. Forest Service studies show “72 percent of the streams within that area are high-quality cold water fisheries” and “water quality is among the highest in the state.”

Developer David White asked the legislators not to impose a fee. “I still believe free enterprise to be the best system,” he said. “The property owner, the mineral owner, has been paying taxes on this for years. The producer is going to pay license fees, road use tax… workers compensation.”

The price of natural gas is low in Pennsylvania and producers can make a 20 percent profit at a price that is about half of what is being charged in other parts of the country for the same profit margin, White said.

Arthur Stewart, owner of D&I Silica, testified before the panel about “the opportunities being realized by my company.”

“The story is being replicated hundreds of times across the commonwealth,” he said.

The company has 40 employees at an average annual pay of over $41,000 and it pays 100 percent of the employees’ health benefits, according to Stewart.

“If we want to develop a world-class gas field here in Pennsylvania, we should develop world-class infrastructure,” Stewart said.

He said the state’s business climate is perceived as a negative, suggesting that the state follow the lead of some developers in foregoing some easy profits now to encourage the growth of the industry.

Warren County Commissioner John Bortz also asked the lawmakers to avoid a fee. “Placing onerous fees, taxes, regulations on this industry at this time may have the effect of dampening any economic effect,” he said. “The Marcellus play is not the only game in town. Big oil can take their resources elsewhere.”

“If legislation results in increased costs (for producers), they’ll be forced to pass those costs on to consumers,” Bortz said.

He stressed that any legislation that imposes a fee must differentiate between the small companies that develop shallow wells and those companies large enough to invest millions in Marcellus development.

Another concern about a fee was that the money goes to municipalities affected by the development, not the state’s general fund.

Elam Herr, assistant executive director of the Pennsylvania State Association of Township Supervisors, said his group’s members “support the gas drilling industry. They just want to make sure their communities are basically held whole.”

“The association and members have gone on record to support an impact fee,” Herr said.

Increased use of roads means higher maintenance and repair costs for the municipalities, he said.

Any water quality impacts would probably end up as the municipalities’ problems and emergency response planning, training, and equipment would add to municipal expenses.

“Very little money directly flows back to the municipalities as far as tax dollars,” he said.

An impact fee that was distributed to the municipalities where the development takes place would help offset those costs, Herr said.

Ridgway Fire Department Chief John Wygant outlined some of the challenges facing emergency responders.

The remote locations in which the wells are often set mean communications problems, dirt roads, and difficulty just finding the site, he said. Emergencies at the wells would also likely mean hazardous chemical situations.

“It sets a whole new set of challenges for my people,” he said. “I have 140 volunteers. Approximately five have ever seen a Marcellus site.”

He said training for emergency response at wells is available, “but it’s very, very expensive.”

The representatives in attendance were: Rapp, Finance Committee Chairman Kerry Benninghoff (R-171), Vice Chairman Gordon Denlinger (R-99), Matt Gabler (R-75), Scott Hutchinson (R-64), Martin Causer (R-67), Fred Keller (R-85), and Tim Briggs (D-149).




Joe Price
Attorney Joe Price is a seasoned Trial Lawyer serving Northeast, Central and Southeast Pennsylvania for the past forty (40) years. He has handled serious personal injury cases in courts throughout the Federal system including New Jersey and New York. Attorney Price is A.V. Rated by Martindale Hubble. He is Board Certified in Civil Practice by the National Board of Trial Advocacy since 1996.