Gas Drilling Group Wants Low Well Tax
Marcellus coalition also would force some to sell gas
Pittsburgh Post-Gazette
20 August 2010
By Joe Smydo,
A trade group wants state officials to reinforce their authority over
natural-gas drilling operations, force some reluctant landowners to
sell their gas and tax new wells at a low rate during years when
they're at their costliest but also producing the most gas.
Those are some of the legislative and regulatory priorities that the
Cecil-based Marcellus Shale Coalition outlines in an internal policy
document obtained by the Pittsburgh Post-Gazette and other
media.
The coalition acknowledged the document, marked "draft confidential,"
but said many of the proposals had been on its website -- http://www.marcelluscoalition.org
-- since spring.
The document says drilling should be a use by right in all zoning
districts, even as Pittsburgh and other municipalities have proposed
bans or zoning restrictions. It also says the state should encourage
natural gas consumption and oppose anti-drilling arguments that "are
not logically or scientifically based."
Kathryn Klaber, coalition president and executive director, said such
steps would promote the orderly, efficient harvesting of the gas and
protect landowners who want to lease their mineral rights.
But Pittsburgh City Councilman Patrick Dowd, who has introduced a bill
to place certain restrictions on drilling operations in the city, says
the document inflames the debate over natural gas drilling.
"I think it's completely one-sided ... a failure to be evenhanded," Mr.
Dowd said.
Ken Weir, a Lincoln Place resident and spokesman for the opposition
group Marcellusprotest.org, said the industry's priorities signal
"corporate greed."
Titled "A Holistic Solution to Modernizing Pennsylvania Policies
Impacting Marcellus Shale Development," the document calls for the
Legislature to bolster the Oil and Gas Act to give the state Department
of Environmental Protection clearer, broader authority over enforcement
of the industry.
Many municipalities lack the expertise to enforce environmental
regulations, Ms. Klaber said. "We as a nation have put state
governments in charge of that critical function," she said.
On its website, the group raises the specter of two or three officials
in a municipality passing an ordinance to prevent gas exploration and
says a pair of conflicting state Supreme Court decisions left the door
open for municipalities to usurp state control. Pittsburgh City
Councilman Doug Shields added to the coalition's concern this week with
a proposal to ban drilling citywide for environmental reasons.
The coalition's website says state law should be clarified to specify
that drilling is a permitted use in all zoning districts and in every
municipality, while allowing municipalities to retain authority on
issues such as "lot size, coverage, access and landscaping and safety
features."
The document also calls for the state to adopt a "fair pooling" program
to promote efficient development of gas fields. Critics refer to the
concept as "forced pooling."
Gas companies employ or contract with landmen who negotiate drilling or
extraction leases with property owners, but not all owners are
interested.
The coalition wants the state to allow gas companies to extract gas
from property owners who decline to sign leases if the holdouts hinder
development of the resource on neighboring properties. According to the
policy document, the pooling program would ensure "all property owners
-- leased and nonleased -- are fairly compensated for gas extracted
under their properties."
Ms. Klaber said it was unfair that some landowners could prevent
neighbors from developing their mineral rights. Mr. Dowd and Mr. Weir
said forced pooling wasn't the answer.
"One thing I know about Pennsylvania is that property rights are very,
very important," Mr. Dowd said.
On its website, the coalition balks at a severance tax, noting that the
industry pays a variety of other taxes and warning that harsh taxation
will stymie capital investment. The internal policy document takes a
different approach, suggesting a 1.5 percent severance tax on the
market value of gas obtained from Marcellus Shale wells during their
first five years of operation and a 5 percent tax after that.
Ms. Klaber said producers needed to recover capital costs during the
initial years of a well's operation, but critics said that's also when
wells produce the most gas.
Joe Smydo: jsmydo@post-gazette.com or 412-263-1548.