Corbett's gas plan falls short, but is a good starting place
Now that Gov. Tom Corbett has come forward with his plan for imposing an impact fee and tightening regulations on Marcellus Shale gas drilling, it’s time for lawmakers to move the issue forward. Corbett’s plan is a starting point, but it falls short in several areas.
Corbett insists his aim is to create jobs by not driving away the natural gas drillers with onerous fees, taxes or regulations. But his proposal, which reportedly puts Pennsylvania near the bottom of extraction fees on natural gas, appears overly generous to the gas industry. And, it’s worth noting, that industry provided nearly $1 million for Corbett’s election.
State lawmakers should examine taxes and fees imposed on natural gas drillers in other shale-gas states. The deeper Utica Shale formation overlaps Marcellus, but also extends into other states, including Ohio. State lawmakers must ensure that Pennsylvania maintains a competitive environment for gas production that balances jobs with revenue for the state.
When comparing states, Harrisburg lawmakers should look at the entire picture, not just gas extraction fees or taxes. Corbett’s plan seems to reflect industry arguments that drillers in Pennsylvania pay a 9.9 percent corporate tax, a cost they do not incur in some other states. It’s important to look at the entire picture, not just well- or production-based taxes.
By setting fees at the low end of the range, Corbett’s plan would leave about $200 million on the table. His proposal is projected to raise about $120 million a year to start, with 75 percent going to the counties where the drilling occurs and the balance to the state. One of the 13 alternative shale gas plans in the Legislature is projected to raise closer to $360 million a year. That proposal, from two House Republicans from southeastern Pennsylvania, would impose a higher fee on gas production and also distribute a higher percentage of the money to the state, with less going to the counties hosting the drilling. Marcellus Shale does not extend under the southeastern part of the state.
Corbett’s plan has 75 percent of drilling fees going to counties for repairing roads damaged by heavy trucks and other costs related to drilling. The alternative plan from the Philadelphia-area representatives would send 75 percent of the money to the state and allow it to fund a wider range of programs from environmental to education, housing and economic development.
Corbett’s plan falls short by not raising more money for the state, but he’s correct in trying to limit the number of hands in Harrisburg trying to grab a piece of the shale gas pie. A better solution might be a 60/40 (local/state) split or even 50/50, with narrow, gas-related spending limits placed on any money going to Harrisburg.
Another feature of Corbett’s plan requiring rethinking is the idea of making the impact fee an option for counties. It’s possible such a plan could have a county dropping the fee because a nearby county opted not to impose it, possibly due to political or economic influence from powerful gas interests.
Such a scenario would only benefit the gas industry. Therefore, any fee or tax included in the final version of shale-gas legislation should apply uniformly across all counties.
On the plus side, Corbett’s plan wisely expands buffer zones, moving drilling further away from water wells and waterways. It also doubles penalties for violation of environmental regulations.
Another plus found in Corbett’s plan would help support natural gas filling stations along major highways. This is important in a chicken-and-egg sort of way. If demand for natural gas is to expand, with more vehicles running on cleaner-burning natural gas, the vehicles need fueling stations to keep them going.
It’s time for more debate on how to craft natural gas rules that best protect human health and the environment while also raising money to benefit counties hosting drilling as well as the state. Corbett’s plan is a good starting point, but it does not go far enough in raising revenue for Pennsylvania.
While leaving money on the table is troubling during an economic slowdown, it is an issue anytime. Why should Pennsylvnians benefit less from shale gas production than citizens of other states?
A tax or fee program that puts Pennsylvania in the middle of the pack of the overall tax climate is better than Corbett’s plan, which is overly favorable to the gas industry. Corbett has provided a good starting point; now it’s time for the Legislature to get to work to make it better.
