Controversial Scarnati Shale Bill Passes Senate

A controversial Bill aimed at regulating and taxing the Natural Gas industry, sponsored by Senator Joe Scarnati, today passed the Senate.

The Bill, which proponents say establishes reasonable fees on gas drilling while establishing strong environmental safeguards, has come under heavy fire, especially within the past week.

Opponents of the Bill have called it a “free-for-all” for the gas industry, and are continuing efforts to defeat the legislation.

The following is a statement released by Sen. Joe Scarnati’s office:

HARRISBURG — The state Senate today approved legislation that would establish reasonable fees on gas drillers, establish strong environmental safeguards, and strengthen oversight of the Marcellus Shale drilling industry, according to Senator Joe Scarnati, R-Jefferson, who sponsored the measure.

Passage of Senate Bill 1100 comes after months of negotiation and compromise on a number of areas, including how funding would be allocated and local zoning issues.

“This legislation will help communities impacted by drilling, provide for reasonable local zoning parameters and implement strong environmental protections,” Scarnati said. “Through a reasonable and well-thought-out impact fee on shale companies, we can manage this tremendous resource in a way that improves our economy, creates new jobs and opportunities for our residents and protects our quality of life.”

Scarnati said his proposal would impose a tax rate of approximately a 3 percent on gas production – retroactive to 2010 — that is expected to generate tens of millions of dollars a year to help maintain roads and sewer systems in communities affected by the drilling.  It would also fund statewide initiatives that finance infrastructure improvement, environmental cleanups and open space.

Scarnati’s bill would impose a sliding fee of $50,000 per well in the first year of production, with a $10,000 reduction each subsequent year. Starting in the 11th year until the 20th year of the well, an annual fee of $10,000 is imposed.

According to estimates, the fee proposal would raise $94 million from wells that were producing gas this year, a figure that would rise to $155 million next year and $255 million by 2014.  Over the next five years the fee will yield more than $1 billion dollars.

Approximately 55 percent of the fees generated would go to counties and municipalities in the Marcellus Shale region and 45 percent to statewide infrastructure projects, environmental programs and other projects related to natural gas production.

Other funds also would be set aside for county conservation districts, firefighter training programs, the Fish and Boat Commission and for boosting availability of affordable housing.

The legislation also provide for standardized but flexible zoning standards which would allow communities to retain reasonable control over zoning power  — a “solid and important compromise” that Scarnati said has drawn support from local government groups because it provides for local authority while creating reasonable baselines.

Scarnati said the increased environmental safeguards include increased setbacks, a listing of all chemicals used at a drill site, provisions for water safety, an increase in well bonding, and increased penalties for environmental violations.

“The Marcellus Shale industry is here to stay in Pennsylvania – bringing us jobs, huge economic benefits and the potential for energy independence,” Scarnati said.  “It makes sense to impose a reasonable impact fee on the industry to provide the funding necessary to further protect our natural resources, particularly at a time when our state is being forced to stretch our tax dollars.”

He pointed to the huge influx of jobs in the past several years and the continued need for workers with a variety of skills to propel the growing industry.

Researchers with the Marcellus Shale Education and Training Center estimate shale drilling will require between 3,700 and 15,000 direct jobs in central and northern Pennsylvania by 2013 and an additional 8,100 to 13,500 direct jobs in southwestern Pennsylvania by 2014.

In addition, the state Department of Revenue estimates that natural gas drilling companies have paid more than $1.1 billion in taxes since 2006, including corporate taxes, sales taxes and employee withholding.

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