Skip to content

Senate, House Pass Marcellus Shale Bills – Work Remains

Last week, both the House and Senate passed their respective versions of a Marcellus Shale bill, but it remains clear that much discussion and negotiations will precede any final decision and passage of legislation for Governor Corbett’s signature.

Last week, the Senate finally dealt with amendments to SB 1100, sponsored by President Pro Tempore Joe Scarnati (R-Jefferson). The amendment provided details for the imposition of fees, distribution of fee revenue and zoning. The amendment was approved in the Appropriations Committee meeting, along party lines, with Sen. John Wozniak (D-Cambria) also voting in the affirmative. Senate Democrats offered several amendments on the floor, but all failed, largely on straight party-line votes, and the bill finally passed by a 29-20 vote.

The bill imposes an effective tax rate of roughly three percent on drilling, which would be collected by the Public Utility Commission.  The funds would be divided on a 55 percent local and 45 percent state funding ratio, with funds targeted for improvements to infrastructure, water and sewer projects and housing resulting from impacts of the industry.

At the same time, the House spent four days debating and voting on the more than 150 amendments filed to HB 1950, sponsored by Rep. Brian Ellis (R-Butler). After three days of lengthy caucuses, debates and procedural votes on constitutionality, Republicans passed a motion to end debate on amendments, and the bill passed by a vote of 107-76. 

Prior to passage, a handful of amendments from both Democrats and Republicans were adopted; however, the vast majority of amendments were not considered. Overall, the allocation and distributions of fees chart did not change from the original bill. Under the House bill, a fee of $40,000 per well is imposed, with revenues split with 75 percent of the fees allocated to the counties and municipalities and the remaining 25 percent going to the state for programs and services.

Now that both the House and Senate have their bills in place, House and Senate leaders and the Governor face a difficult process of resolving differences on regulations, zoning, local control  and most certainly the fees and division of funds from revenues through the legislation. 

Current Shale Revenue Numbers Revised
Meanwhile, the Department of Revenue acknowledged that it had previously overestimated by more than 100 percent what landowners with shale leases would pay in personal income taxes from drilling profits. Lease and royalty income taxes totaled $46.2 million for 2010 – not the $102.7 million state tax officials reported this summer.

Overall, tax collections from drilling have doubled since 2009, according to the department, which is tracking the impact of drilling at the request of Gov. Tom Corbett and the media. The state has reaped $1.56 billion in taxes from the drilling boom since it started in 2006, according to department figures.

Most of those payments come from business taxes, which are direct remittances from oil and gas extraction companies and their contractors.  Overall tax collections resulting from Marcellus shale activity were about $200 million until this year, when they jumped to more than $373 million. Corporate income taxes from drilling companies more than doubled, to $254.2 million, from the prior year.  Personal income tax payments from leases and royalties represent a much smaller portion of the pie, but still tripled from the $15.2 million collected in 2006.

A rose by any name…
During a Press Club Luncheon on Monday, Governor Corbett responded to the passage of the two Marcellus Shale bills from their respective chambers, stating that in his opinion, the House-passed natural gas package imposes a fee, not a tax.

Corbett had pledged during his gubernatorial campaign that he would not raise taxes. Answering a question from the audience, the Governor said of the House bill, “There are impacts to the community and [the counties] are best suited to determine what all the impacts are that are out there. We reserved a portion for the state to deal with the state impacts in those communities, but they are impacts and I don’t believe they are a tax, and so I guess we have a difference of opinion.”

Corbett’s reference was to statements by anti-tax lobbyist Grover Norquist that the House bill contained a tax. “Just look at where the money goes and it is easy to see that it does not pass the laugh test when it comes to trying to claim this as a fee. Regarding the revenue that HB 1950 would direct to the commonwealth, it goes to increasing revenue for first responder training, transportation infrastructure, health care provider training, and ‘citizen outreach and education.”

Norquist wrote to the members of the General Assembly, and in the letter noted that many other businesses cause wear and tear on roads, and create the need for health care and first responders, but HB 1950 singles out the natural gas industry as needing to pay a portion of costs for these services.