Scarnati expects a Marcellus Shale impact fee, not a tax

April 1, 2011

State Sen. Joe Scarnati

HARRISBURG — As the state legislature considers the 2010-11 operating budget, state Sen. Joe Scarnati said a bill targeting Marcellus Shale natural gas exploration is progressing.

The bill could include what Scarnati called an “impact fee,” which would be used to help counties and municipalities repair damaged roads and allow for increased environmental security.

“The governor has made it very clear, and there is no reason to doubt him, that he will not support a severance tax that goes to the general fund,” Scarnati said. “However, he has opened the door recently to supporting an impact fee. I’m hopeful that I will be able to put together a package with an impact fee, environmental and safety issues in the coming weeks, and we can get a bill put together for the industry.”

He supports an Arkansas style model of taxing Marcellus Shale, which calls for low or no severance tax for the first two years of exploration to allow the industry to become established.

In Arkansas, that period was followed by the implementation of a five-percent severance tax.

“The house Democrats wanted to tax at not only the highest rate in the nation, but at a rate twice that of any other state,” Scarnati said. “That would have pushed the industry out of the state.”

The legislature and Gov. Tom Corbett have to be careful with enacting a bill, because gas exploration is seen as a vital component of the future of the Pennsylvania economy.

“Our goal is certainly not to chase the industry out,” Scarnati said. “Our goal is to be fair. What we saw (proposed) last year was a tax that was too high or punitive. We’ve got to strike a balance. Once the tax becomes an impairment, then it is too high.”

The impact fee, however, would be determined by the amount of money the industry costs local governments across the state. Scarnati was clear that the state budget will not gain any revenue if the impact fee is enacted.

“It becomes a tax if it comes to the state,” he said. “This fee would be reflective of the impacts of the industry on counties and municipalities across the state. Putting a number on it is part of the challenge.
“Drilling could have a dramatic impact on a county, and this money will go to where the drilling is.”

Scarnati said the state government is “not new to the game of impact fees,” saying similar fees are paid by landfills, and that money is given to the local counties and municipalities that are affected by that landfill.

“There are various ways to structure this,” he said. “It would be premature to say anything other than the money from the fee will ultimately go to the county and the municipality that is affected.”

On the whole, Scarnati said Marcellus Shale presents many problems to the state, but he welcomes those problems because of the economic benefit gas exploration could have.

“This is an industry that offers great opportunity, and also offers challenges,” he said. “I can tell you that in my own county, there are huge impacts.”

Scarnati to
school districts: It’s not set in stone

“We need to have an open dialogue, and hopefully everybody can benefit,” Scarnati said about proposed cuts to local public schools.

He said he understood the issues schools are facing, and that the three districts in Jefferson County — Brookville, Brockway and Punxsutawney — may all face major changes in student programming.

However, Scarnati said there will be a “reshuffling of the deck” over the next several weeks, and he hopes that reshuffling will result in some more money to local schools.

“There has been a lot of debate, a lot of good healthy debate,” he said. “Now the process begins in the legislature, working with the governor. We have to work within the parameters given.”

Scarnati said he has worked “very closely” with school districts in Jefferson County, and he hopes to help them.

“We don’t have some of the issues that the urban districts have, but we are really tied with financial issues this year,” he said. “We have to find out from them how we can help them save money.”