Legislature Reckoning With Growth Of Natural Gas Industry

An expert on law and public policy spotlighted how the Pennsylvania General Assembly has been trying to adjust state laws to keep up with the rapidly growing Marcellus Shale natural gas industry.

Ross Pifer (left), director of the Agricultural Law Resource and Reference Center at Penn State, detailed a busy 2010 and forecasted several issues that will come before the legislature this year. Mary Anne Heston, a member of the Potter County Natural Gas Task Force Public Education Committee, attended Pifer’s webinar and reported these details:

Enacted in the 2009-2010 Session

• Marcellus Shale Reporting Requirements (SB 297): Production data for Marcellus wells must be reported semi-annually on Aug. 15 and Feb. 15. DEP must publish these reports on its website.
• Clean and Green Amendment (SB 298):  The bill stipulates that rollback taxes assessed on land previously enrolled in the Clean and Green program be imposed only on the land developed for gas activity and only after the receipt by the county assessor of the “restoration report” required of the gas company following its drilling operations.  Lands excluded from the rollback tax would be those developed for pipelines, those for which the surface owner does not own the mineral rights, and those developed for pipeline storage yards.  One problem anticipated is the delay in restoring land upon which multiple wells may be drilled or upon which wells may be drilled into the Utica Shale. The tax may not be imposed until the final restoration report is filed.
• Coal Bed Methane Review Board established (HB 1847): This bill, though not directly addressing gas development, may have implications for “split estate” issues.  The bill establishes the procedure for consideration of objections to coal bed development plans from surface owners without mineral rights.  It establishes a three-member board appointed by the governor to resolve objections.  Cases that are not successfully resolved are referred to a court.
• Severance Tax (SB 1042):  To resolve the annual budget bill, both the Senate and House agreed to pass a severance tax by Oct. 1, 2010, that would take effect  on Jan. 1, 2011.  However, the tax was not enacted.  Unresolved issues included whether or not such a tax should be imposed, what the rate of the tax would be, whether the volume or value of gas would be taxed, how resulting revenue would be distributed, and what wells would be exempted.

Other legislation considered but not passed in 2009-2010:

• Surface Owner Protection Act (HB 1155), which would have provided surface owners who do not own the mineral rights to their land the right to negotiate surface use and compensation.
• Amendment of Dormant Oil and Gas Act (HB 2266), which would have amended the act of 2006, providing for mineral estate abandonment and for preservation of interests in oil and gas.
• Water Supply Protection, which would change the current presumption of a drilling company’s  responsibility under the Oil and Gas Act from within 1,000 feet and six months of drilling to within 2,000 feet and 24 months of drilling.

Legislative issues for the 2011-2012 session:

• Tax on gas, but probably not a severance tax, which Governor Tom Corbett opposed in his campaign.  Local impact fees have been discussed.
• Expanded protection for water supplies and surface owners.
• Modernization of the Pennsylvania Oil and Gas Act.
• Fair (or forced) pooling.  Pooling may be the best way to ensure that the least number of wells are drilled to effectively extract the gas.  However, real issues remain, such as how to fairly compensate landowners, how to honor the rights of private ownership, and how to assess the impact on the lease market.

Ross Pifer referred participants to other resources, which can be accessed at www.law.psu.edu/aglaw