Impact fees from natural gas drilling are critical for Pennsylvania local governments, and preserving the current floating structure of those fees is needed in the event that additional production places a greater burden on infrastructure and local services, the head of a county association said.
“What we want is assurance that the impact fee will remain intact in its current form, with all of its current distributions, at its current rate,” Douglas Hill, executive director of the County Commissioners Association of Pennsylvania, said.
Impact fees levied on the development of gas wells have generated more than $200 million annually for Pennsylvania’s local governments since 2012. Communities use those funds to offset the impact of shale gas exploration on a variety of needs, including repairs to roads and bridges, emergency services and environmental purposes.
As part of his budget proposal for the next fiscal year, Pennsylvania Gov. Tom Wolf called for a 5 percent severance tax on the value of natural gas extracted from wells. Currently impact fee collections change annually based on the price of natural gas and the number of wells. However, under Wolf’s plan, impact fees would become fixed at $225 million a year, the highest payout to date.
The state collects the impact fee and distributes the funds to local governments through the Unconventional Gas Well Fund, which is for counties and municipalities with wells to spend on a number of approved purposes. The Marcellus Legacy Fund distributes funds for all counties to spend on environmental initiatives.
“We think it is structured remarkably well and the fund has yielded fantastic results, not only on behalf of all the impacted counties and their communities, but also it has benefited counties statewide through the Marcellus Legacy Fund,” Hill said.
Hill added that counties want to be able to manage the additional impacts on their resources that come from greater gas production.
Furthermore, the county commissioners association notes that property taxes are the only locally raised revenue that counties rely on, making it even more important that impact fees continue in the same way for counties to manage the additional burden on programs and services.
Counties have typically used their impact fee revenue for transportation projects, such as repairs to heavily traveled roads and bridges, Hill said.
But there are many other impacts on counties as a result of the drilling.
For instance, emergency management planning is key because counties are responsible for preparing for potential emergencies at the well sites, often located in sparsely populated areas. In that regard, some counties have used the funds to set up 911 dispatch centers. Others have invested in human services, criminal justice and housing.