Government Affairs

Fall 2010 Government Affairs Committee Report (September 2010)

Time is running out on the 2009-2010 legislative session and PCPG’s Government Affairs Committee is busy tracking numerous proposed environmental bills.  For the remainder of the year, the Pennsylvania Senate is scheduled to be in session for three weeks – September 20, 30 and October 12.  The House is scheduled to be in session the weeks of September 13, 20, 37, October 4 and November 8 and 15.  PCPG's Government Affairs Committee is tracking the following pending environmental legislation:

Oil and Gas Severance Tax

The budget compromise in July included a commitment to pass a Marcellus Shale natural gas severance tax by October 1, 2010, with revenue from the tax to be allocated to the Commonwealth, counties, municipalities and environmental projects.  Presently, there are a number of severance tax proposals:

• SB905 (Musto, D) – 5% of the gross value of each Unit (1,000 cubic feet of natural gas) severed at the wellhead plus 4.7 cents per Unit severed, does not specify revenue allocation.  Referred to the Finance Committee in June 2009.

• SB977 (Dinniman, D) – 5% of the gross value plus 4.7 cents per Unit severed, with 50% of the tax going to the General Fund, 22% to the Environmental Stewardship Fund, 22% to the Commonwealth Financing Authority for distribution to municipalities to assist with the costs and burdens of natural gas drilling, extraction and transmission; 3% each to the Fish and Boat Commission and Game Commission for habitat conservation and public access projects.  Referred to the Finance Committee in July 2009.

• SB1254 (Dinniman, D) – 5% of the gross value plus 4.7 cents per Unit severed, with proceeds from the tax going to a Natural Gas Tax Relief, Conservation and Community Investment Fund with annual disbursements of $22 million to the Environmental Stewardship Fund, $22 million to the Commonwealth Financing Authority, $3 million each to the Fish and Boat Commission and the Game Commission, with the remainder going to the Property Tax Relief Fund.  Referred to the Finance Committee in March 2010.

• HB1489 (George, D) – 35 cents per Unit severed (rate to be adjusted annually but never less than 35 cents) with proceeds going to the Natural Gas Severance Tax Account (a restricted account within the General Fund) to be distributed as follows: first $75 million to the General Fund (first year only), 50% of the remaining proceeds also to the General Fund, 15% to the Environmental Stewardship Fund, 20% to the Local Government Services Account, 2% to the Hazardous Sites Cleanup Fund, 3% to the Conservation District Fund, 2% to the Game Commission, 3% to the Fish and Boat Commission, 2% to the Department of Public Welfare, 2% to the Oil and Gas Environmental Disaster Recovery Fund and 1% to the DEP for state dam removal, restoration and repair projects.  This bill has moved through various committees and was committed to the Appropriations Committee in June 2010.

• HB2443 (Levdansky, D) – 25 cents per Unit severed at the wellhead (rate to be adjusted annually but in no event less than 25 cents) with proceeds going a Natural Gas Severance Tax Fund to be distributed as follows:  45% to the General Fund, 22% to the Environmental Stewardship Fund, 20% to the Local Government Services Fund, 2% to the Hazardous Sites Cleanup Fund, 3% Conservation District Fund, 2% to the Game Commission, 4% to the Fish and Boat Commission, 2% to the Department of Public Welfare. Referred to Finance Committee in April 2010.

• HB2438 (Evans, D) – 5% of the gross value of each Unit severed at the wellhead plus 4.7 cents per Unit severed, with 90% going to the General Fund and 10% deposited into a restricted receipts account.  The restricted receipts account will be allocated as follows:  50% each to counties and municipalities where natural gas has been severed for roadways, bridges, industrial and commercial development, parks and recreation and maintenance and capital improvements to municipal waste and sewer systems. Referred to Appropriations Committee in April 2010.

Importantly, none of the bills earmark any proceeds from the severance tax to the Geologic and Topographic Survey. The Survey’s mission is to serve the citizens of Pennsylvania by collecting, preserving, and disseminating information on the Commonwealth’s geology, geologic resources, and topography to contribute to the understanding, wise use, and conservation of its land and resourcesAs such, the Survey provides valuable benefits to the citizens of Pennsylvania, not only with respect to mineral, oil and gas resources, but also with respect to education, water supply, geologic hazards such as landslide and sinkhole prone areas and tourism.  PCPG urges you to reach out to your State representatives and senators and request that severance tax legislation include specific earmarks to support the Survey.

Other Pending Marcellus Shale Legislation

• Abandonment of Mineral Rights: HB1436 (White, D) deeming mineral rights in real property abandoned after a period of ten years of nonuse unless the subsurface rights owner records a claim of interest within 3 years of enactment or ten years from the nonuse, whichever is later and providing for recording of surface owner’s claim to abandoned mineral rights.

• Gas Moratoria: HB2609 (Mundy, D) one year moratorium on issuance of new Marcellus Shale well permits; HB2235 (Vitali, D) three year moratorium prohibiting the leasing of State forest lands for purposes of natural gas exploration, drilling or production (passed the House, remains in the Senate Environmental Resources and Energy Committee since May 5^th); SB1447 (Ferlo, D) one year moratorium during which no new Marcellus Shale wells may be drilled, including wells that have been permitted, but drilling has not begun.

• Royalties: HB2214 (George, D) requiring a minimum royalty of 15% to lessor and would prohibit the deduction of any severance tax or post-production costs from the minimum royalty calculation.  (Likely in response to the Supreme Court’s decision in Kilmer v. Elexco Land Services Company, in which the Court held that producers could deduct post-production costs when calculating royalties, i.e., the “net-back method”).

• Wastewater Treatment: SB1451 (Baker, R) requiring any facility seeking to treat and discharge industrial wastewater from oil and gas activities to have a licensed operator and directing EQB to promulgate regulations establishing qualifications for the licensed operator.

• Water Supply Protection: HB1155 (George, D) providing protections to surface owners, requiring surface use and compensation agreements with surface owners, providing that a well operator must restore or replace an affected water supply; HB1205 (Pickett, D) extending rebuttable presumption to 2,000 feet of the oil and gas well where the pollution occurred within 2 years of completion of drilling or alteration and requiring a pre-drilling and post-completion survey of wells, springs or other water sources within 2,000 feet of the well; HB2608 (Mundy, D) prohibiting gas well within the surface or subsurface area of, or using hydraulic fracturing or horizontal drilling within 2,500 feet of, a surface water supply for a community water system; HB2613 (Hanna, D) rebuttable presumption that well operator is responsible for pollution of a water supply that is within 5,000 feet of an oil and gas well where pollution occurred within one year of completion of drilling or alteration of the well; HB2630 (Boback, R) requiring certain information on gas well permit applications and imposing a restriction that no well site may be drilled using hydraulic fracturing or horizontal drilling within 3,000 feet of a reservoir that serves as a water source for a community water supply system and requiring well operators to submit to DEP a complete list of substances to be used in fracture fluid to be used in the succeeding quarter; HB381 (Mundy, D) requiring semiannual reporting of Marcellus Shale well production, amount and type of waste generated at each well and each facility that accepted waste from the well; SB1416 (Costa, D) establishing the Emergency Drinking Water Support Fund for testing of drinking water believed to be affected by hydraulic fracturing or a spill of fracture fluids, purchase of clean water if affected and establishment of a $10 surcharge on gas well permits; SB1452 (Baker, R) requiring the gas well permit application to include information on the zone of influence on groundwater and an estimate of the time of travel that a potential release of fracking fluid or other liquid would take to reach the nearest waterway, resources to contain a release and to prevent a blowout, notice to downstream water users in the event of remediation, prohibiting hydraulic fracturing or horizontal drilling within 3,000 feet of a water supply reservoir, requiring groundwater monitoring at various stages of well installation and development and at various depths; SB1461 (Leach, D) establishing gas well setbacks – 100 ft. horizontally from surface water bodies and wetlands, 2,500 feet of a surface water or 1,000 feet from a groundwater source, and casing requirements for protection of groundwater and water supplies; providing for hydraulic fracturing chemicals and surface impoundments, for hydraulic fracture fluids monitoring and for use of surface impoundments for temporary flowback storage, requiring DEP inspections before each stage is completed and for well plugging funds and for local ordinances.  See also HB2213 (George, D) for similar themed proposed legislation.

Other Pending Environmental Legislation

• Geologically Hazardous Areas: HB1450 (Deasy, D) providing for the designation and regulation of geologically hazardous areas within the Commonwealth.  This bill was reported out of the Environmental Resources and Energy Committee on June 29, 2010 and was recommitted to the Rules Committee.  Re-reported from the Rules Committee on September 13, 2010 and laid on the table.

• Geospatial Coordinating Counsel: HB2300 (Fairchild, R) creating a State Geospatial Coordinating Counsel, an advisory board to provide advice and recommendations to the Governor on geospatial issues, providing for uniformity, data standards, coordination and the efficiency of geospatial policy and technology issues among Federal, State and local government agencies, academic institutions and the private sector.  Re-reported from the Rules Committee on September 13, 2010 and laid on the table.

…and that’s not even a complete list!  If you have specific comments, suggestions, questions or recommendations on any of the above-referenced bills, please send an email to Don Wagner, the Chair of PCPG's Government Affairs Committee.