Could frack tax be a big ‘frack you’ to local communities?

By Rachel Martin | Watchdog.org

PITTSBURGH — Some Pennsylvania residents remain skeptical of a severance tax on fracking, especially because it might eliminate the current impact-fee system, which has brought in more than $200 million a year.

Jodi Noble, township manager for Chartiers Township, is passionate about the importance of impact fees.

“As a municipality that has been heavily drilled … they help offset the things we experience.”

Chartiers Township — in Washington County, southwestern Pennsylvania — has received $1.9 million from these fees over the three collection years.

Noble said the fees helped fund two prominent projects in her township. First, Allison Hollow Road, a major collector road in the area, is being reconstructed.

It will cost $1.8 million, and the township has already paid $1 million from impact-fee money. It borrowed the rest, planning to pay it off with future fees. But the township is mindful the money could disappear if a severance tax is enacted, so it structured the loan with that in mind, Noble said.

In addition to fixing potholes and adding guard rails, the work is correcting water drainage problems. Richard Myers lives along the road and experienced the problem up-close.

Water would often pool on the road near the edge of his driveway, and in the winter it would freeze. One year, a younger driver slipped on the ice and slid right into his yard, Myers said.

The road has now been graded properly, and he has watched with satisfaction as rainwater flows directly down the new drain. Myers said he’s sure that this single aspect of the project could save a life.

A second project of the township’s was helping pay for a tanker and a pumper for the fire department. The tanker in particular is important, Noble said, because some well sites are in more remote locations without water service. While it’s been several years since the township has had such a fire, she “certainly (has) seen it in surrounding areas.”

The impact fee structure, part of Act 13, was passed in 2012. It amends Pennsylvania’s oil and gas law. A severance tax had been politically impossible for Gov. Tom Corbett, but he signed this workaround.

Pennsylvania’s Public Utility Commission administers the collection and distribution of these fees. You can find all the formulas and other wonky details you might want in a PUC presentation on its website.

A chunk of money — $25.5 million in 2011 — comes off the top of fees collected and is distributed to specific state agencies “to offset the statewide impact of drilling.”

Those agencies include the PUC, the Department of Environmental Protection and the Emergency Management Agency. Of the remaining money, 60 percent to goes to counties and municipalities with wells, and 40 percent goes into a “Marcellus Legacy Fund.”

Some residents and local administrators are skeptical about a severance tax because, the way the law is currently written, a severance tax would automatically eliminate the impact-fee system.

The Corbett campaign has seized upon this to bolster opposition.

BRIGHT, SHINY AND NEW: A portion of new guard rail along the reconstructed Allison Hollow Road. Additional guard rails are one component of this project funded with impact fees.

“Tom Wolf wants to replace the local impact fee with a severance tax that would instead pump that money into Harrisburg’s coffers,” said Chris Pack, communications director for the Corbett campaign. “Our local communities just can’t afford the tax-and-spend policies of millionaire … Tom Wolf.”

As Watchdog reported earlier, Wolf’s proposal for a severance tax would “direct a portion of the revenue generated from a 5 percent severance tax back to the communities affected by drilling,” though that portion has not been disclosed.

State Rep. Jesse White, D-Washington, supports a severance tax, but not at the expense of the impact fees. White said that the choice between the two is a “manufactured crisis” by opponents of a severance tax.

White has introduced legislation that offers one solution to the problem. While some bills for a severance tax simultaneously repeal the two paragraphs that kill off the impact fees, White’s bare-bones bill would preemptively repeal them, without having to first hammer out the specifics of a severance tax bill.

In the bill’s co-sponsorship memo, White stated, “The impact fee is essential for communities dealing with the impacts of gas drilling; to take it away just to fill a $1.7 billion hole in the state budget is unacceptable.”

House Bill 2403 was referred to the Environmental Resources and Energy Committee in late August, and there it sits.

Some local officials certainly appear nervous. The Washington County Association of Township Officials has recommended townships within the county pass a resolution that supports the impact fees and opposes changes that would reduce the amount municipalities receive.

Noble wouldn’t comment on whether she would oppose a severance tax, if it left the impact-fee system in place. “I stay out of the politics,” she said, and reiterated that Cecil Township had passed a resolution opposing any change, reduction or elimination of the impact fee.

She said the current system is direct and actually related to the costs of drilling. “It directly channels money back.”

IMPACT FEES BY YEAR: This chart from the Pennsylvania Public Utility Commission’s Act 13 site shows the breakdown of the $632 million collected for three years.