The Impact of Impact Fees on Marcellus Shale

The first meeting of the Marcellus Municipal Co-op was a huge success in terms of assessing the needs of local communities as related to Marcellus Shale

As the Marcellus Shale boom continues to redefine the landscape of Pennsylvania, people are focusing in on how government at all levels is working to find the right balance for everyone to coexist and prosper.

Because most of the high-level policy on the natural gas industry is determined at the state level, it would make the most sense for Pennsylvania to come up with a comprehensive statewide approach.

The problem is that Gov. Tom Corbett has remained adamant and steadfast in his opposition to a severance tax of any kind, even though Pennsylvania is the only drilling state without such a tax.

In light of recent proposed budget cuts by Corbett that most experts acknowledge will lead to local tax increases, the public has made it clear they want drillers to pay their fair share. A recent poll by Susquehanna Polling and Research showed 70 percent of Pennsylvanians support some sort of severance tax. Various proposals have been floated based on severance taxes in Texas and Arkansas, and although the natural gas industry has publicly expressed a willingness to discuss a severance tax, the governor has been a brick wall in his opposition.

Here in southwestern Pennsylvania, local governments have been vocal in the need for some sort of assistance in dealing with Marcellus Shale-related issues. At the recent meeting of my Marcellus Municipal Co-op, nearly 30 local elected officials came together to discuss their experiences and explain the financial burden of Marcellus Shale on their communities.

In some places, nearly one-third of the municipal budget is going toward these issues, there is no way under the law for these taxpayer monies to be recouped, and the gas industry has yet to step in and take a proactive role.

As a result, local taxpayers are being forced to pick up the tab, which is almost offensive considering the amount of money being made by the natural gas industry in our backyards. The message from local municipalities was clear: While local governments are not trying to kill the goose laying the golden egg that is Marcellus Shale, the taxpayers should not be forced to foot the bill for the nest.

Talking with former Governor Tom Ridge, now with the Marcellus Shale Coalition, about the needs of our small towns

Pennsylvania law leaves the responsibility of crafting local ordinances to deal with drilling issues to the municipalities, and there are real costs involved that need to be addressed — costs such as legal fees, engineering and enforcement costs, legal advertising and transcription of public hearings, and a myriad of other costs most people never think about.

There are also major infrastructure costs associated with drilling activity, and although some companies do a very nice job rebuilding roads when they are finished, all it takes is one irresponsible company to do so much damage it could break the taxpayers.

This increasingly dark scene was showered with an unexpected ray of sunlight recently, when Joe Scarnati, president of the Republican-controlled state Senate, publicly expressed his support for local impact fees for Marcellus Shale activity. Just last week, Corbett finally softened his stance by saying that, although he remains opposed to any sort of severance tax, he would consider signing legislation for local impact fees.

Politics is often defined as the art of the possible, and it has become clear that local impact fees are the only possibility on the table right now in terms of recovering financial effects of drilling. Local impact fees already exist under the law (for other things, such as charging developers for infrastructure improvements) and because the structure is already in place, all we would need to do is craft a new kind of impact fee.

The state would pass enabling legislation, and then each municipality could pass an ordinance for a fee to offset their costs, with appropriate transparency and accountability controls.

At my Marcellus Municipal Co-op meeting, I committed myself to drafting legislation for a Marcellus Shale impact fee, and within days, both the Senate and the governor have committed themselves to the same idea.

While the devil is always in the details, it appears we are finally on our way to crafting a bipartisan solution that will help enable our small towns to cultivate the economic benefits of Marcellus Shale activity while finally being given the tools to ensure drilling activity is taking place in a responsible way to ensure proper respect to our natural resources and the safety of our residents.

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