Backtalk Section

Each week we feature questions to the guests of “The Marcellus Shale and You” that never made it on-air.    Saturday’s show featured Rick Stauffer and Katrina Currie; here they respond to listeners’ questions about the impact fee, using the fee for conservation causes, and the potential for the gas industry to relocate to Ohio.

Listen to Saturday’s podcast at: http://themarcellusshale.com/the-marcellus-shale-and-you-saturday-november-19th-2011/

There’s all this talk about an impact fee for natural gas.  Was there ever an impact fee on the coal industry?  If not, why not?  There has been a lot of impact on communities from acid run off.
Darin in Greentree

Rick Stauffer:
In Pennsylvania, coal can be taxed as local property before it is extracted.  Rates of taxation on coal vary from county to county, but in some locations it represents a substantial portion of the local property tax revenue.

As the coal is extracted, the value of the associated property decreases accordingly and the local tax base is reduced. As many coal companies own not just the subsurface rights to the coal, but also the land above it, they may also pay property taxes on their land holdings.

Coal companies also pay state corporation taxes in Pennsylvania, federal and state black lung fees, and federal and state reclamation fees; they also make mandatory contributions to trust funds to treat acid mine drainage.

Katrina:
Pennsylvania has no severance tax on coal mining or other natural resource extraction.  Themain differences between then and now are the stringent environmental regulations and enforcement in place that ensure the drilling industry is held accountable.

What is the Growing Greener Environmental Stewardship Fund and how is it connected to the Impact Fee?   What do you think about this fund?
Lori in Donora

Rick Stauffer:
Pennsylvania Governor Tom Ridge and the General Assembly created the five year, nearly $645 million Growing Greener Program, which is acknowledged as the largest single investment to clean up and restore the environment in Pennsylvania’s history.

The original program invested in watershed restoration, preserving open space, investing in parks and recreation, reclaiming abandoned mines and wells, and upgrading sewer and drinking water systems.

In 2002, Governor Schweiker and the General Assembly expanded funding for Growing Greener by adopting a new $4.25/ton fee on municipal waste disposed in the state, expanding the investment from $650 million to $1.3 billion through 2012. In 2005 Governor Ed Rendell and the General Assembly passed Growing Greener II, allocating a $625 million bond issue passed by voters in 2004 and thus adding to the initial Growing Greener.

The program expanded to include alternative energy development projects, downtown redevelopment, historic preservation, funding for an energy efficient appliance tax holiday and funding for the first time to the Game, Fish, and Boat Commissions.  In addition, each county was provided with funding to do local projects in each of these areas along with the original Growing Greener categories. Due to the changes made in 2005, Growing Greener project funding largely ends this year with the spending of the last of the bond issues.  Most of the remaining funds from the fee enacted in 2002 will be used to pay off the bond issue.

Katrina:
Growing Greener was created with the intention of being a temporary program, and is now being funded through new state debt. This funding is set to expire this year. The program spends the majority of its funds buying open spaces and farmlands.

While it has helped reclaim some abandoned well sites, it also subsidizes a wide range of projects from alternative energy to downtown redevelopment. For example, the program provided $250,000 for the Philadelphia Museum of Art’s Outdoor Sculpture Garden.

This may be a silly question but are local municipalities really equipped with the administrative manpower to deal with having to regulate and maintain an impact fee fund?   Would such a revenue stream be a burden on the very small townships that may have only one or two people dealing with the area’s finances?
Mike, Shadyside

Rick Stauffer:
I think the short answer is that it depends on the municipality. Certainly, larger municipalities will have more manpower to handle and administer impact fee revenues.  However, my feeling is, if a small municipality has the potential revenue coming in that either the state Senate or House proposals call for, those municipalities will find the people needed to make the fee structure work.

Katrina:
County treasurers would collect the fee.  All local governments already have systems in place to collect local taxes and budgets for appropriating funds.  It is fair to allow the counties to use a portion of the fee revenue to fund the cost of collecting the fee.

What are your comments to this statement in the Daily Times:
“But House Democrats blasted the bill for its effective tax rate of 1 percent on drilling companies and argued that it lacked adequate environmental protections.”?
John, Whitehall

Rick Stauffer:
I readily admit I’m not an expert on either of the bills approved by the state House and Senate. I will say that they both include environmental protections more strict than what is currently in place. As for the levies equating to an effective tax rate of 1% on producers, keep in mind an impact fee isn’t the only tax paid by producers in Pennsylvania. A 1% effective rate? Take a look at what West Virginia producers are paying—and even what is being proposed—then come back to me and talk 1%.

Katrina:
Drillers pay the same taxes as every other business in the state — more than $1.2 billion in state taxes since 2006 — and Pennsylvania taxes rank among the highest in the nation.

I hear all of these gas companies complaining about being taxed and having to pay an impact fee.  They threaten to move their operations to Ohio or West Virginia.   These are empty threats because these companies are already deeply ingrained here.  It’s not like they’re going to just pull up their equipment and move to another state.
Connie in Allentown

Rick Stauffer:
I’ve never heard an oil or gas producer complain about paying an impact fee!  What I’m told by producers is that they would welcome an impact fee—what they call a “reasonable impact fee”—to get the uncertainly out of the way and allow them to effectively develop budgets.

As for moving operations to Ohio or West Virginia, a company can be “deeply ingrained” here, but do little or no business. Look at the H.J. Heinz Co. founded  more than 100 years ago in Pittsburgh, but it has no manufacturing facilities in the region—hasn’t for at least five years.

A gas or oil producer that has drilled a well needed to hold onto its lease can sit on that well for a long, long time—and move its rigs, personnel, equipment to Ohio or West Virginia, drill into the same Marcellus or Utica Shale play, and do a lot better fiscally.

Katrina:
Drilling companies are constantly deciding where to invest next. While the drilling industry won’t disappear if a severance tax is enacted, there will be an impact—it’s through reduced investment in the state, lower wages, reduction in job growth, or a reduction in spending on things like road improvements. There are only so many drilling rigs, and other states have natural gas they can move to.

If a driller is not paying for its negative impacts on the environment or infrastructure, it is appropriate to charge a fee to pay for the government’s cost to remedy the problem; it is not appropriate to use the industry as a cash cow for unnecessary, unsustainable, and unworthy statewide projects that are unconnected to drilling’s impact.

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