Marcellus Shale Development and Pennsylvania: Community Sustainability Widener University School of Law Harrisburg, Pennsylvania September 27, 2013 Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Haymaker well (1878)  “Without the slightest warning there was a terrific roar and rumble that was heard 15 miles away. Every piece of rigging went sky high whirling around like so much paper caught in a gust of wind. But instead of oil, we had struck gas. It was being shot out under such enormous pressure that it continued to shake the ground and roar for months rattling windows for miles around.” 2 Pennsylvania Oil and Gas Law Birthplace of the Industry Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 What are the benefits accruing to local communities from shale gas development?  What are the negative impacts suffered by local communities from shale gas development?  Are local communities preparing adequately for a post-shale future? 3 Community Sustainability Balancing the Costs and Benefits Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 What are the benefits accruing to local communities from shale gas development?  Lease bonus / royalty income  Employment  Indirect expenses  Who is receiving these benefits? 4 Community Sustainability Balancing the Costs and Benefits Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 What are the negative impacts suffered by local communities from shale gas development?  Strain on local infrastructure  Increased demand on local services  Perceived decline in quality of life  Environmental concerns  Who is being negatively affected? 5 Community Sustainability Balancing the Costs and Benefits Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Are local communities preparing adequately for a post-shale future?  How are present impacts being addressed?  Is there a divide between haves vs. have-nots?  Should we care?  Will rural communities be more prosperous after shale development has passed? 6 Community Sustainability Balancing the Costs and Benefits Agricultural Law Resource and Reference Center Professor Ross H. Pifer

HB 1950 / Act 13  Changes to Title 58  Chapter 23 – Unconventional Gas Well Fee  Chapter 25 – Oil and Gas Lease Fund  Chapter 27 – Natural Gas Energy Development Program  Chapter 32 – Development (replaces Oil and Gas Act)  Chapter 33 – Local Ordinances Relating to Oil and Gas Operations  Chapter 35 – Responsibility for Fee 7 Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 County / Municipal election  Declining fee schedule dependent upon gas price  Year one – $40,000 to $60,000 ($45,000 in 2012)  Year fifteen – $5,000 to $10,000  Stripper well exclusion  Annual CPI adjustment 8 Act 13 – Chapter 23 Components of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 For wells spud before 1/1/12, fee due on 9/1/12.  Impact fee due annually thereafter on April 1.  Payments to date:  $204 million at 9/1/2012 deadline  $202 million at 4/1/2013 deadline 9 Act 13 – Chapter 23 Impact Fee Payments Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Conservation Districts - $7.5 million (in 2013)  Fish and Boat Commission - $1 million  Public Utility Commission - $1 million  DEP - $6 million  PEMA - $750,000  State Fire Commissioner - $750,000  Penn DOT - $1 million  DEP for Natural Gas Development Program - $20 million total through 2013  Housing Affordability and Rehabilitation Enhancement Fund - $5 million (in 2012) 10 Act 13 – Chapter 23 Annual Distribution of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 60% of remaining revenue to local governments  36% to counties based on number of spud wells in each county  37% to municipalities based on number of spud wells in each municipality  27% to municipalities based on number of spud wells in each county based on:  Proximity to wells  Population  Highway miles 11 Act 13 – Chapter 23 Annual Distribution of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Funds must be used for specified purposes related to natural gas production.  Municipality cannot receive more than greater of $500,000 or 50% of total baseline budget.  Excess provided to Housing Affordability and Rehabilitation Enhancement Fund 12 Act 13 – Chapter 23 Annual Distribution of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Roads, bridges, public infrastructure  Water, storm water, and sewer systems  Emergency preparedness and public safety  Environmental programs  Preservation of water supplies  Tax reductions  Availability of affordable housing 13 Act 13 – Chapter 23 Authorized Uses of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Records management  Social services  Judicial services  Capital reserve funds  Career and technical centers  Planning initiatives 14 Act 13 – Chapter 23 Authorized Uses of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 40% of remaining revenue to Marcellus Legacy Fund  20% to Commonwealth Financing Authority grants (largely water focused)  10% to Environmental Stewardship Fund  25% to Highway Bridge Improvement Restricted Account  25% for water and sewer projects  15% for greenways, trails, recreation, open space, etc.  5% to DCED 15 Act 13 – Chapter 23 Annual Distribution of Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Capital reserve funds  What does this tell us?  Roads, bridges, public infrastructure  Emergency preparedness and public safety 16 Act 13 – Chapter 23 Actual Use of Distributed Impact Fee Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 How does the impact fee relate to community sustainability in the post-shale era?  Is it the answer?  Is it part of the answer?  We must take advantage of this opportunity to create more prosperous communities for the post- shale era.  If not, then we have failed future generations. 17 Community Sustainability Final Thoughts / Questions Agricultural Law Resource and Reference Center Professor Ross H. Pifer

 Marcellus Shale Resource Area   Marcellus Shale Blog  18 Agricultural Law Center Web Resources Agricultural Law Resource and Reference Center Professor Ross H. Pifer

The Agricultural Law Resource and Reference Center Prof. Ross Pifer, Director Phone: (814) Web: Other Resources: 19