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Pennsylvania Natural Gas Drilling Bill: GOP Lawmakers Seek Vote

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HARRISBURG, Pa. (AP) — A final framework is at hand on sweeping legislation to impose an impact fee and update safety regulations on Pennsylvania's booming natural gas industry, top Republican state lawmakers say.

Republicans notified rank-and-file lawmakers Saturday night that they hope to hold votes this week on a framework reached by negotiators from the House, Senate and Gov. Tom Corbett's office during closed-door negotiations over the past six weeks.

"These discussions have progressed rapidly over the course of the last two weeks," House Speaker Sam Smith and House Majority Leader Mike Turzai said in a letter to lawmakers. "In fact, staff have been working throughout the weekend and will be working (Sunday) in order to have a proposal that we can consider as early as this week."

Pennsylvania is the only major gas-producing state that doesn't tax natural gas production, and Democrats have not been part of the negotiations after trying unsuccessfully for three years to win enough Republican votes to impose a severance tax on the industry. Because Corbett opposes a tax on the industry, Republicans, who control the Legislature, have instead pursued an "impact fee" that he views as being fundamentally different than a tax. But House and Senate Republicans have clashed over the size of the fee, while Democrats and environmental groups view their proposals as too low and members of the industry have been split over paying any levy.

The 15-year impact fee would rise and fall with the price of natural gas and inflation. Currently, the price of natural gas is about $2.30 per million British thermal units — a measurement used at major pipeline hubs. If the price is between $3 and $5, the total per-well fee would be $310,000 over 15 years, not counting inflation, according to a summary distributed to senators.

At the current price of gas, the 15-year fee total would be $240,000 per well, not counting inflation, according to a summary distributed to House Democrats. The maximum per-well fee a company would pay is $355,000, if gas stays above $6, while the minimum would be $190,000, if gas stays below $2.25, again not including inflation.

But the fee at any price would be well below the average lifetime per-well tax paid in other natural gas states, including $993,700 in West Virginia, $878,500 in Texas and $555,700 in Arkansas, according to the Harrisburg-based Pennsylvania Budget and Policy Center, a liberal think tank.

Counties that host the drilling would have the option of whether to impose the fee — a key element sought by Corbett and disliked by senators — but a critical mass of municipalities would have 60 days to override a county's refusal. Counties and municipalities that refuse the fee would not get a share of the money.

Money from the impact fee and state forest drilling royalties would be distributed to a wide range of purposes, including bridge repairs, open space, water and sewer plant improvements, statewide environmental cleanup programs and purchases of natural-gas fleet vehicles. Local governments that are home to drilling would get 60 percent of the money from an impact fee, with 40 percent going to state programs or agencies, according to the summaries, even though Corbett had opposed using impact fee money for state programs.

The bill would increase the required distance between drilling and public water sources such as reservoirs, but not to the extent sought by Democrats and environmental groups, and it would require the state to develop regulations for transporting drilling wastewater and enforce qualifications of treatment plant operators.

The legislation also would address a top priority of the natural gas industry and set limits to prevent municipal officials from imposing zoning ordinances that effectively prevent drilling there. A drilling operator could ask state utility regulators to review a local ordinance to determine whether it allows for "the reasonable development of oil and gas." If the Public Utility Commission or a state court decides that a local ordinance fails, the municipality would be unable to receive impact-fee money until it changes it, according to the summaries.

Pennsylvania lawmakers have talked about whether to tax the natural gas industry since it arrived in earnest in 2008 to tap into the Marcellus Shale natural gas formation, considered the nation's largest-known natural gas reservoir. The drilling has drawn opponents who fear it is polluting the water supply. Meanwhile, the Legislature has done little to update drilling-safety regulations from the 1980s that never envisioned deep and horizontal drilling that produces millions of gallons of polluted wastewater. Both the House and Senate passed bills on the topic late last year, but some details were substantially different, such as the size of the fee and the distribution of the money. The Senate bill also would have levied the fee without local approval.

The Marcellus Shale lies primarily beneath Pennsylvania, New York, West Virginia and Ohio. Pennsylvania is the center of activity, with more than 4,000 wells drilled in the past three years and thousands more planned as shale emerges as an affordable, plentiful and profitable source of natural gas.

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