Analysis: Tax May Be the Price to Change Pa. Drilling Laws
Washington PA Observer Reporter
13 June 2010
By Marc Levy
HARRISBURG - Pennsylvania's Legislature is a place where victory almost
always arrives in the form of a hard-won compromise, and the state's
rapidly growing natural gas industry may be about to discover that.
So far, the industry has been successful in dodging efforts by Gov. Ed
Rendell and many Democratic lawmakers to slap an extraction tax on the
methane they pump from the rich Marcellus Shale reserve that lies
underneath much of the state.
But the drilling companies will need help from those adversaries in
addressing a wish list of changes in state laws they are seeking to
make it easier for them to pursue the gas.
Paying a tax just might be the price.
"What we've said all along is that the conversation begins and ends
with the extraction tax," said Brett Marcy, a spokesman for House
Majority Leader Todd Eachus, D-Luzerne. "We cannot even begin to
seriously discuss some of the issues that the natural gas industry
wants us to take action on until we get the necessary support for a
natural gas extraction tax."
The Rendell administration says the industry's top issues - such as a
law that could limit municipal zoning authority over where drilling can
occur - will be dealt with separate from the pursuit of a tax.
"Those are apples and oranges in some respects," said Rendell's chief
of staff, Steve Crawford. "We're not willing to say, 'We will roll
local governments in this state if you support a tax.'"
But Dave Spigelmyer, a Chesapeake Energy Corp. executive who also is
vice chairman of the Marcellus Shale Coalition, said the administration
has told the industry group that a discussion of drilling issues will
include talking about a tax.
For now, talk is in the early stages and industry-backed legislation
that encompasses the wish list has not been introduced.
Two of the top issues could be controversial.
One would essentially outlaw a municipality from using zoning to
prevent the collection of gas from below the property of someone who
wishes to sell it - a change opposed by the Pennsylvania State
Association of Township Supervisors.
Municipalities "have the ability to properly zone different activities
within the jurisdictions. With the industry being able to drill
horizontally up to a mile, why do they need to have zoning done away
with?" asked Elam Herr, the association's assistant executive director.
The other would allow a state authority to force a holdout landowner
into a pool with neighbors who wish to sell their mineral rights in a
block to a drilling company. The state would decide how the holdout is
to be compensated for the gas, based on the agreements between the
willing landowners and the company.
Democratic Rep. Bud George, the House Environmental Resources and
Energy Committee chairman from Clearfield County, warned that such a
provision is likely to spark fierce public opposition over the
perception that government could take away property rights to benefit
private companies.
The discussion comes during a tough political window for the industry.
House Democrats and Rendell administration officials are pointing to
the Clearfield County well blowout earlier this month as a prime
example of why a tax is necessary to pump money into environmental
protection efforts, not to mention the cash-strapped state budget.
Last year, opposition from the Senate Republican majority scuttled
Democratic efforts to impose a tax as part of the state budget.
In theory, the caucus could try to get a better deal for the industry
by opposing a tax again this year in hopes that Tom Corbett, the
state's Republican attorney general who has signed a no-new-taxes
pledge, wins the gubernatorial election in November.
Senate President Joe Scarnati, R-Jefferson, said Friday that he
supports a tax that feeds environmental protection programs and
communities where wells are drilled.
But Scarnati, R-Jefferson, whose Brockway house is a short drive from
the well blowout, said the enactment of a tax is inextricably linked
with a serious attempt to address the complaints of an industry that is
investing billions and hiring thousands.
"Let's be honest about it," Scarnati said. "No business or industry is
going to sit down and agree to a tax and then not agree to solving
problems moving forward."