Marcellus Shale Development and Pennsylvania: Marcellus Shale Development and Pennsylvania: Community SustainabilityCommunity Sustainability

Widener University School of Law Widener University School of Law

Harrisburg, PennsylvaniaHarrisburg, PennsylvaniaSeptember 27, 2013September 27, 2013

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Haymaker well (1878)Haymaker well (1878) ““Without the slightest warning there was a terrific roar Without the slightest warning there was a terrific roar

and rumble that was heard 15 miles away. Every piece and rumble that was heard 15 miles away. Every piece of rigging went sky high whirling around like so much of rigging went sky high whirling around like so much paper caught in a gust of wind. But instead of oil, we paper caught in a gust of wind. But instead of oil, we had struck gas. It was being shot out under such had struck gas. It was being shot out under such enormous pressure that it continued to shake the enormous pressure that it continued to shake the ground and roar for months rattling windows for miles ground and roar for months rattling windows for miles around.”around.”

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Pennsylvania Oil and Gas Law Pennsylvania Oil and Gas Law Birthplace of the IndustryBirthplace of the Industry

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

What are the benefits accruing to local communities from shale gas development?

What are the negative impacts suffered by local communities from shale gas development?

Are local communities preparing adequately for a post-shale future?

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Community SustainabilityCommunity SustainabilityBalancing the Costs and BenefitsBalancing the Costs and Benefits

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

What are the benefits accruing to local communities from shale gas development? Lease bonus / royalty income Employment Indirect expenses

Who is receiving these benefits?

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Community SustainabilityCommunity SustainabilityBalancing the Costs and BenefitsBalancing the Costs and Benefits

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

What are the negative impacts suffered by local communities from shale gas development? Strain on local infrastructure Increased demand on local services Perceived decline in quality of life Environmental concerns

Who is being negatively affected?

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Community SustainabilityCommunity SustainabilityBalancing the Costs and BenefitsBalancing the Costs and Benefits

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Are local communities preparing adequately for a post-shale future? How are present impacts being addressed? Is there a divide between haves vs. have-nots?

Should we care? Will rural communities be more prosperous after shale

development has passed?

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Community SustainabilityCommunity SustainabilityBalancing the Costs and BenefitsBalancing the Costs and Benefits

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

HB 1950 / Act 13HB 1950 / Act 13 Changes to Title 58Changes to Title 58

Chapter 23 – Unconventional Gas Well FeeChapter 23 – Unconventional Gas Well Fee Chapter 25 – Oil and Gas Lease FundChapter 25 – Oil and Gas Lease Fund Chapter 27 – Natural Gas Energy Development Chapter 27 – Natural Gas Energy Development

ProgramProgram Chapter 32 – Development (replaces Oil and Gas Chapter 32 – Development (replaces Oil and Gas

Act)Act) Chapter 33 – Local Ordinances Relating to Oil and Chapter 33 – Local Ordinances Relating to Oil and

Gas OperationsGas Operations Chapter 35 – Responsibility for FeeChapter 35 – Responsibility for Fee

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Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

County / Municipal electionCounty / Municipal election Declining fee schedule dependent upon gas Declining fee schedule dependent upon gas

priceprice Year one – $40,000 to $60,000 Year one – $40,000 to $60,000 ($45,000 in 2012)($45,000 in 2012) Year fifteen – $5,000 to $10,000Year fifteen – $5,000 to $10,000

Stripper well exclusionStripper well exclusion Annual CPI adjustmentAnnual CPI adjustment 8

Act 13 – Chapter 23Act 13 – Chapter 23Components of Impact FeeComponents of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

For wells spud before 1/1/12, fee due on 9/1/12.For wells spud before 1/1/12, fee due on 9/1/12. Impact fee due annually thereafter on April 1.Impact fee due annually thereafter on April 1. Payments to date:Payments to date:

$204 million at 9/1/2012 deadline$204 million at 9/1/2012 deadline $202 million at 4/1/2013 deadline$202 million at 4/1/2013 deadline

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Act 13 – Chapter 23Act 13 – Chapter 23Impact Fee PaymentsImpact Fee Payments

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Conservation Districts - $7.5 million (in 2013)Conservation Districts - $7.5 million (in 2013) Fish and Boat Commission - $1 millionFish and Boat Commission - $1 million Public Utility Commission - $1 millionPublic Utility Commission - $1 million DEP - $6 millionDEP - $6 million PEMA - $750,000PEMA - $750,000 State Fire Commissioner - $750,000State Fire Commissioner - $750,000 Penn DOT - $1 millionPenn DOT - $1 million DEP for Natural Gas Development Program - $20 million total DEP for Natural Gas Development Program - $20 million total

through 2013through 2013 Housing Affordability and Rehabilitation Enhancement Fund - Housing Affordability and Rehabilitation Enhancement Fund -

$5 million (in 2012)$5 million (in 2012) 10

Act 13 – Chapter 23Act 13 – Chapter 23Annual Distribution of Impact FeeAnnual Distribution of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

60% of remaining revenue to local governments60% of remaining revenue to local governments 36% to counties based on number of spud wells in 36% to counties based on number of spud wells in

each countyeach county 37% to municipalities based on number of spud wells 37% to municipalities based on number of spud wells

in each municipalityin each municipality 27% to municipalities based on number of spud wells 27% to municipalities based on number of spud wells

in each county based on:in each county based on: Proximity to wellsProximity to wells PopulationPopulation Highway milesHighway miles 11

Act 13 – Chapter 23Act 13 – Chapter 23Annual Distribution of Impact FeeAnnual Distribution of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Funds must be used for specified purposes Funds must be used for specified purposes related to natural gas production.related to natural gas production.

Municipality cannot receive more than greater of Municipality cannot receive more than greater of $500,000 or 50% of total baseline budget.$500,000 or 50% of total baseline budget.

Excess provided to Housing Affordability and Excess provided to Housing Affordability and Rehabilitation Enhancement FundRehabilitation Enhancement Fund

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Act 13 – Chapter 23Act 13 – Chapter 23Annual Distribution of Impact FeeAnnual Distribution of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Roads, bridges, public infrastructureRoads, bridges, public infrastructure Water, storm water, and sewer systemsWater, storm water, and sewer systems Emergency preparedness and public safetyEmergency preparedness and public safety Environmental programsEnvironmental programs Preservation of water suppliesPreservation of water supplies Tax reductionsTax reductions Availability of affordable housing Availability of affordable housing

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Act 13 – Chapter 23Act 13 – Chapter 23Authorized Uses of Impact FeeAuthorized Uses of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Records managementRecords management Social servicesSocial services Judicial servicesJudicial services Capital reserve fundsCapital reserve funds Career and technical centersCareer and technical centers Planning initiativesPlanning initiatives

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Act 13 – Chapter 23Act 13 – Chapter 23Authorized Uses of Impact FeeAuthorized Uses of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

40% of remaining revenue to Marcellus Legacy Fund40% of remaining revenue to Marcellus Legacy Fund 20% to Commonwealth Financing Authority grants (largely 20% to Commonwealth Financing Authority grants (largely

water focused)water focused) 10% to Environmental Stewardship Fund10% to Environmental Stewardship Fund 25% to Highway Bridge Improvement Restricted Account25% to Highway Bridge Improvement Restricted Account 25% for water and sewer projects25% for water and sewer projects 15% for greenways, trails, recreation, open space, etc.15% for greenways, trails, recreation, open space, etc. 5% to DCED5% to DCED

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Act 13 – Chapter 23Act 13 – Chapter 23Annual Distribution of Impact FeeAnnual Distribution of Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Capital reserve fundsCapital reserve funds What does this tell us?What does this tell us?

Roads, bridges, public infrastructureRoads, bridges, public infrastructure Emergency preparedness and public safetyEmergency preparedness and public safety

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Act 13 – Chapter 23Act 13 – Chapter 23Actual Use of Distributed Impact FeeActual Use of Distributed Impact Fee

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

How does the impact fee relate to community How does the impact fee relate to community sustainability in the post-shale era?sustainability in the post-shale era? Is it the answer?Is it the answer? Is it part of the answer?Is it part of the answer?

We must take advantage of this opportunity to We must take advantage of this opportunity to create more prosperous communities for the post-create more prosperous communities for the post-shale era.shale era. If not, then we have failed future generations.If not, then we have failed future generations. 17

Community SustainabilityCommunity SustainabilityFinal Thoughts / QuestionsFinal Thoughts / Questions

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

Marcellus Shale Resource AreaMarcellus Shale Resource Area www.law.psu.edu/marcelluswww.law.psu.edu/marcellus

Marcellus Shale BlogMarcellus Shale Blog www.pennstatelawmarcellusblog.comwww.pennstatelawmarcellusblog.com

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Agricultural Law CenterAgricultural Law CenterWeb ResourcesWeb Resources

Agricultural Law Resource and Reference CenterProfessor Ross H. Pifer

The Agricultural Law Resource and Reference Center The Agricultural Law Resource and Reference Center Prof. Ross Pifer, DirectorProf. Ross Pifer, DirectorPhone: (814) 865-3723Phone: (814) 865-3723Email: rpifer@psu.eduEmail: rpifer@psu.eduWeb: Web: www.law.psu.edu/aglawwww.law.psu.edu/aglawOther Resources: Other Resources:

www.law.psu.edu/marcelluswww.law.psu.edu/marcelluswww.pennstatelawmarcellusblog.comwww.pennstatelawmarcellusblog.com

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