Reaction to Impact Fee: Not Far Enough...or...Too Far

Senate President Pro Tem Joe Scarnati may feel like he just can’t win. In the hours after he introduced a natural gas drilling impact fee in Pennsylvania – a plan that would assess a base levy of $10,000 against every Marcellus Shale well in the state – he’s been pounded by criticism and lukewarm reaction from both sides of the aisle.

House Democratic Leader Frank Dermody of Allegheny County released a statement calling the fee a “weak alternative” to a broader severance tax. “The huge corporations that will make billions of dollars by taking gas out of Pennsylvania must pay their fair share,” he argued. “This small impact fee will not achieve that. Right now, those corporations pay nothing. With this impact fee, they would pay only a small fraction of what they should.” Democratic Senator Jim Ferlo of Pittsburgh, an outspoken opponent of drilling who’s pushing for a statewide hydraulic fracturing moratorium, was equally critical. “There is evidence that the gas drilling industry will leave scars on the Pennsylvania landscape that will place a cost on state government and all Pennsylvania taxpayers,” he said in a statement. “A severance tax is uniform and fair, and is not unreasonable when you compare it to our competitor states. We should enact a severance tax now to make sure that we are not making our taxpayers pay for the impacts of the drilling industry.”

Environmental advocates are also cold on the idea. Myron Arnowitt of Clean Water Action didn’t like the fact the fee puts money into conservation districts, rather than the Growing Greener program. “There’s also no resources that will be available to the Department of Environmental Protection from this proposal. DEP has had their budget cut every year, and they are the agency that gets to oversee and make sure we don’t have negative impacts from Marcellus Shale drilling.”

Scarnati preemptively addressed these concerns during his initial conference call, pointing out a fee directing money to DEP – whose budget is located in state’s the state’s General Fund – would be vetoed by Governor Corbett. “Those that continue to talk about, we want a severance tax – a true statewide severance tax – I think they are forgetting the reality that we have a governor who has for a year said publically and privately he will veto a tax,” he said. “I don’t think that there’s any merit in either legislative body to be pushing ahead with a severance tax, and delaying this for well over another year.”

And while environmentalists and Democrats think his plan is too small, House Republicans are indicating it’s too large. House GOP spokesman Steve Miskin reacted to the idea: “Does our caucus support it, in that it has 102 Republican votes? No, it does not. But since, looking at where the money is spent, it is clearly not tied to the budget whatsoever. So it is an interesting proposal worthy of further staff evaluation.” If you’re not fluent in legislative-speak, when spokesmen say something like, “we’ll evaluate it” or “we’ll take a look at it,” they probably aren’t too inclined to call the measure to a vote.

Even Scarnati’s partner, Senate Majority Leader Dominic Pileggi, was lukewarm on the fee, which would not provide funding to counties where drilling isn’t taking place. “My view is that the entire commonwealth needs to benefit from an extraction tax, regardless of whether or not communities have wells or pipelines in their own area,” he said during a brief phone interview.

Where does Corbett stand on the issue? His spokesman, Kevin Harley, told the Post-Gazette, “[the proposal] starts a conversation. The governor is obviously awaiting the findings of the Marcellus Shale Advisory Commission, who is looking at ways to grow the natural gas industry in an economically and environmentally responsible way and one of the things that they will be looking at is an impact fee.” In other words, we’ll get back to you. Scarnati, however, told reporters that when he and Corbett had lunch together this week, the governor effectively gave the measure a “yellow light.”

Grumblings aside, the reality is that of all the fees and taxes proposed, this new measure is the most likely to end up on Corbett’s desk. As one of the Senate’s top Republicans, Scarnati has the power to bring it to a floor vote. His statement that “it ain’t going to be easy” to pass a budget without also passing the fee shows he’s serious about making the bill a priority during the upcoming budget season, when most legislation gets passed into law. While hard-line liberals like Ferlo may vote against it, Democrats representing districts dotted with drilling rigs will likely vote yes. That would probably offset the “no” votes from conservative Republicans who think the measure goes too far.

The fee’s House fate seems a bit murkier. Majority Leader Mike Turzai is very conservative, especially on fiscal issues. He and a good chunk of GOP lawmakers are inclined to oppose any sort of tax or fee increase, no matter where it goes. That being said, public support for a severance tax or fee continues to grow – this week’s Quinnipiac University poll showed 69 percent of Pennsylvanians are in favor of the idea. Moderate Republicans in suburban districts will likely support the fee for that reason. So, in the House, passage could come down to whether Democrats agree with Scarnati’s assessment that this fee is the best they’re going to get, or whether they’ll vote “no” in a philosophical show of support for a broader tax.