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Pennsylvania Governor Proposes Fee on Gas Drillers

Pennsylvania is the only major oil-and-gas-producing state without a drilling tax. The state’s governor has promised not to raise taxes so he’s proposing a fee instead, angering environmentalists.

Gov. Tom Corbett announced a plan today to impose the first-ever fees on companies drilling for natural gas in Pennsylvania and to use the revenue raised to cover costs related to gas production.

Under Corbett's proposal, drillers would pay up to $160,000 per well, spread out over the first 10 years of the well's production, though they could earn credits of up to 30 percent by investing in natural gas fueling stations or gas-powered buses. The governor's office estimated that the state and local governments would split $120 million to $200 million a year in fee revenue.

Pennsylvania has been the only major oil-and-gas-producing state without a drilling tax or fee, drawing heat from environmental groups as well as from some members of the legislature and public. Corbett's plan would change that, but advocates criticized the approach of charging flat fees, rather than taxing drillers based on production or revenue, as several other states do.

"This impact fee structure is a gift to the drillers," said Jan Jarrett, president and CEO of PennFuture, an environmental group that has pushed for stronger drilling rules. Tomorrow morning, Jarrett said she would join several advocacy groups and state legislators in calling for a tax on gas extraction.

Corbett's fee proposal is part of a larger overhaul of Pennsylvania's drilling rules. His plan also would expand the buffer between drilling operations and water wells and increase fines for some safety or environmental violations.

The Marcellus Shale Coalition, an industry group, issued a statement saying it supports Corbett's plan in general and that it was still reviewing the specifics.

Corbett has proposed sending three-quarters of the fee money to local governments to spend on the effects of drilling, from road maintenance to emergency response preparedness to shortages of affordable housing.

The rest of the revenue would be divided among several state agencies, including the transportation, environment and health departments. Some environmental and budget groups have argued for fewer restrictions on where and what the money is spent on, saying drilling has statewide effects and costs.

As ProPublica has reported, health complaints are emerging in Pennsylvania and other states where drilling has intensified. In June, Pennsylvania's health secretary proposed creating a health registry to track drilling-related complaints.

The health department could receive $1 million to $2 million a year from the fee, based on estimates from the governor's office, but it's unclear whether the money would be used on the registry. The governor's announcement says that fee revenue could be used to investigate health complaints and for "collecting and disseminating information." Health Department spokeswoman Christine Cronkright said the agency would submit plans to the governor within 30 days for how it would like to spend the money.

To become final, some of Corbett's proposals would require legislative action, while others could be implemented with administrative changes.

Jarrett said she's concerned that the entire package will be submitted to the legislature as a block, tying toughened regulations and penalty hikes to the fee proposal.

"I would not want to see the Marcellus fee tied to all these improvements," she said. "They are separate issues and they should go on separate tracks."

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