Pennsylvania Passes Long Awaited Marcellus Shale Regulation

March 2012Articles In the Zone

The Pennsylvania legislature recently passed the long awaited regulation of Marcellus Shale exploration and drilling. The new law significantly expands the power of the Pennsylvania Public Utility Commission (PUC) and levies impact fees for wells drilled in the state.

The most publicized portion of the new law relates to impact fees, which vary based on the price of natural gas. If gas prices stay below $2.25 per thousand cubic feet, the fee will be around $190,000 per well during the life of the well. If prices triple, the fee could be in the range of $355,000.

Under the new law, the PUC will collect impact fees from natural gas drillers. The PUC will disburse the funds under a formula providing 60 percent to the counties and local government in the shale drilling area and 40 percent toward statewide environmental projects. Those projects may be a variety of ventures affecting water, park lands and infrastructure improvements.

If a municipality passes an ordinance restricting drilling, there is a new challenge available. Drillers can challenge those ordinances either at the PUC or in Common Pleas Court.

To help local governments, the law allows them to essentially pre-approve the changes in the law by requesting PUC input on any proposed zoning ordinance that restricts drilling.

The PUC does not currently have the staff to collect funds and review ordinances. The fees it will be collecting begin this September to cover drilling activity in 2011. The PUC anticipates subcontracting with a vendor to perform these services for at least the balance of 2012 and for half of the year in 2013. It also anticipates hiring staff to review proposed ordinances.

The law provides new responsibilities for the PUC in addition to more stringent drilling regulations.

For more information, please contact Philip L. Hinerman.