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Shale gas drilling benefits touted Act 13 discussion

Economic impact felt

CRANBERRY TWP — State and energy industry officials agreed Thursday that shale gas development in Pennsylvania and its positive economic impacts are on their way to being managed correctly through the implementation of Act 13.

That law, which amended the state’s oil and gas rules, has distributed more than $406 million statewide.

However, they said more work lies ahead to continue this influx of revenue and to use it appropriately.

Business leaders from Butler, Allegheny and Beaver counties filled the banquet room at the Hilton Garden Inn as part of an educational series by the Marcellus Shale Coalition and a federation of business groups, including the Butler County and Pittsburgh North Regional chambers of commerce.

“This has never occurred in Pennsylvania,” Joy Ruff of the Marcellus Shale Coalition said about the gas impact fees.

“There has never been a direct revenue source to local government. This is historical.”

Signed into law in February 2012, Act 13’s most prominent change was the establishment of impact fees on every unconventional gas well. Unconventional drilling refers to producing gas by drilling through geological shale formations, most commonly the Marcellus and Utica shales ranging up to 12,000 feet deep.

The fee assessed on drillers changes yearly based on natural gas prices and the Consumer Price Index. In 2012, drillers paid $45,000 per unconventional horizontal well and $9,000 per smaller unconventional vertical well. The fee continues on a sliding scale for up to 15 years.

For example, for a well drilled in 2011, the second year fee was $35,000 for horizontal and $7,000 vertical.

The fees are designed to bring money back to the counties and municipalities in which the most drilling is taking place. However, the revenue benefits all counties.

The fees have been collected twice: retroactively for 2007 to 2011 and then again for 2012. So far, more than $406 million in fees from drillers has been collected and distributed statewide. Impact fee revenue payments for 2013 will be distributed on July 1, 2014.

Butler County and all 57 of its municipalities have received a combined $5.1 million from impact fees. An additional $311,000 has come from the Marcellus Legacy Fund, which is a separate fund that supports programs across the state, ranging from environmental remediation to promoting vehicle fleet conversions to natural gas.

Municipalities may spend the impact fee funds they receive broadly. Construction and repair of roads, bridges and other infrastructure are common, but there are many other categories to which they can allocate funds, from human services to emergency preparedness.

Ruff, community outreach manager for the coalition, which represents gas and oil development in the Appalachian region, said Pennsylvania is fortunate to be a hotbed of gas development. She said there are other shale plays around the globe that could be profitable, but Pennsylvania so far has been cooperative.

“This is a very competitive industry, and if Pennsylvania can’t stay competitive, we are going to dampen the enthusiasm of private industry here,” she said.

Ruff said it is important for residents and businesses to understand how the gas industry is regulated because it will help them do business together.

“It’s up to you to ask where this money is going,” she said. “It’s up to you to understand where your elected officials are pointing and directing these dollars.”

State House Majority Leader Rep. Mike Turzai, R-28th, credited his fellow lawmakers for coming to an agreement on regulating natural gas production.

Unlike New York, which has a moratorium on drilling, Pennsylvania allowed development to take place and is reaping the rewards.

“Our members jumped into the issue, began to go to sites, began having significant discussions, having debates, meeting people in the industry, meeting people with the environmental concerns, and they came away with a very, very common sense conclusion: We ought to show the public we care about the safety and concern, but at the same time, we want this new partnership,” he said.

He said the result of Act 13 encouraged gas developers because it gave them a certainty they would be allowed to work here.

Karen Matusic, public and government affairs manager for XTO Energy, spoke about the company’s commitment to producing gas from shale in the county.

The Fort Worth, Texas-based driller and subsidiary of ExxonMobil has its Appalachian headquarters in the Thorn Hill Industrial Park, which is partly in Cranberry Township.

It has drilled more than 60 wells in the county during the past four years and has about 46,000 new acres under lease.

“So that Butler County impact fee is going to keep rising,” she said, adding the company plans to keep at least two drilling rigs active in the county.

She said overall gas production from the Marcellus Shale alone has reached about 12 billion cubic feet per day.

“If the Marcellus region were a country, its natural gas production would rank third in the world, just after Russia and the whole of the U.S. put together,” she said.

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