Since 1974, the state’s Clean and Green program has allowed farmers and landowners to pay a lower property tax rate on plots of land larger than 10 acres that are used for agriculture or are forests or open space.
But with the booming development of the Marcellus Shale, many area farms now also have gas wells on them.
In 2010, state legislators voted to amend the law so that any land used in gas and oil drilling could no longer claim the tax break. Owners would be responsible for paying the difference between the higher rate and their reduced amount from as early as 2007.
However, some county tax assessment workers have argued the language of the amendments has created a confusing paper trail that has made it harder for departments to exchange information necessary to compute tax rollbacks.
“We’ve been expecting some cooperation,” said Washington County tax assessor Brad Boni. “We would expect that the (state Department of Environmental Protection) would have information that they would be able to share with us or something to that effect, but they don’t seem to feel the same way.”
The law governing the Clean and Green program was changed to reflect the increased use of agricultural land for unconventional oil or gas drilling.
Land used for drilling could no longer be claimed as eligible for the lower tax rate, and a rollback tax was to be charged to the landowner. The tax would be applied only to the land affected by the industrial use – not the entire parcel of land.
The 2010 amendment ordered the DEP to send well-site restoration reports, also known as reclamation reports, directly to county assessors’ offices. Energy companies fill out restoration reports after work at any given location is complete. The document shows how much land was disturbed and what steps were taken to remediate the sites.
Boni said that information would have made his job very easy.
“It seemed to make sense,” Boni said. “You would think the well operator, the person out there every day who has disturbed the earth and probably would have had a site plan, would have a pretty good idea of how much land they’re using.”
But Act 34, an amendment ratified in 2011, changed the way information is transferred from the state to county assessors.
“This new law doesn’t say what it used to say,” Boni said. “Instead of saying ‘as measured from a well-site restoration report,’ they changed it to ‘as determined when a well-site production report is submitted to the DEP.’”
When it comes to state law, a couple of words can make a world of difference.
Boni said the onus is now on county assessors to determine the dimensions of the area used for oil or gas extraction. Workers from county offices have had to rely on images from websites like Google Earth, aerial photographs or have had to visit sites with GPS devices to pinpoint tracts of land that have been affected.
No collection notices have been sent out in Washington County thus far, but there’s potential for significant tax income. For example, Boni said a Washington County farm that had to pay rollback taxes on five acres from 2007 to the present would owe roughly $700 in rolled-back Clean and Green taxes. Seventy to 80 percent of the money generated would go to local school boards and the county and local municipalities would get the difference.
Boni said of the nearly 8,000 Clean and Green properties in Washington County, roughly 1,000 have had wells drilled on them. So far the county has begun surveying 22 properties, but has not yet sent collection notices.
Carol Baker, 64, of Chartiers Township, owns property that is enrolled in the Clean and Green program, four acres of which has had well pads on it since 2007. She said she wasn’t opposed to property being used in oil or gas production being barred from the program.
“It makes sense, because if you put any kind of structure – a barn or anything like that – that comes out of Clean and Green, so I can understand them saying that about tanks or wells,” Baker said.
Baker said she had heard rumors about a change in the law, but had no idea she was liable for back taxes.
“Now that, I’m opposed to,” Baker said. “I would protest that. That’s not right because if they don’t pass the law, that’s their problem. Why should we have to pay for something that happened before the law was passed?”
Change creates a challenge
While it may have made collecting data harder for assessors, Doug Wolfgang, director for the state Department of Agriculture’s Bureau of Farmland Preservation, said the change from restoration to production report was made in order to better reflect the impact of drilling as it was happening.
“Act 34 changed the trigger from the well-site restoration report to well production report,” Wolfgang said. “Legislators didn’t feel the restoration report was the most consistent. There’s a period of time there could be multiple wells on a pad. Sometimes it’s an ongoing process,” and an energy company could have “submitted multiple wells, some producing and some not.”
Wolfgang said the law requires gas companies to submit production reports to the DEP, which then has 30 days to send them to county assessors.
But while the documents may hold a more accurate reflection of when and how much gas is being pumped out of a plot of land, the production report does not include acreage information. So, individual counties are left to their own devices.
“We would have liked them to use the reclamation permit,” said Tioga County Chief Assessor Deb Crawford, whose county has already sent out more than 60 rollback tax notifications, “because it is a challenge for us to try to determine how many acres have been used on any given property.”
John Frazier, Greene County’s chief assessor, said he was waiting for more instruction from the DEP before attempting to assess any Clean and Green rollbacks. He didn’t know how many properties would be affected in Greene County.
“I’ve gotten copies of the law and read it, and read it, and read it,” Frazier said, “and I just can’t get anybody to explain it to me. Now, I’m a fairly smart individual and I’ve been doing this for 18 years and this is the single most complicated piece of legislation I’ve ever seen.
“Someone wasn’t thinking when they wrote this, or they wrote it for the oil and gas guys, but definitely not for me.”
War of wording
Frazier, Crawford and Boni said they have not received any production reports from the DEP. Rather, they have to search on their own for wells drilled in their county on DEP’s website.
Kevin Sunday, deputy press secretary for the DEP, said the department was simply following the law as it was written.
“The counties don’t have to do rollback taxes,” Sunday said. “It’s up to them” to determine the best way to calculate lot acreage.
Sunday pointed out that Washington County received $4.4 million in Act 13 revenue in addition to the money municipalities have received.
“Our position is that posting the reports online satisfies the requirement to give information to the county assessors,” Sunday said. “Counties have means for determining acreage for other uses. The way the law is structured, we have to make reports available. But the reclamation and the production reports were never meant to determine acreage.”
Boni disagrees with Sunday’s reading of the law. He points to the wording of the bill itself.
“The crux of it is, ‘rollback taxes shall be imposed’ makes it a mandate – it doesn’t make it my option. If it said, ‘may be imposed,’ I would have the opportunity to make a decision.”
State Rep. Jesse White, D-Cecil, wondered whether the lack of transparency might have been caused by reluctance on the part of the DEP to fully comply with the law.
“There’s nothing stopping the DEP from providing that data,” White said. “The fact they’re not readily doing it is troubling. Unfortunately, it fits with the pattern of the DEP to show a disregard for due diligence when it comes to oil and gas.”
White voted yes on the 2011 amendment but said he didn’t realize the communication issues it would cause. He said unless legislators acted soon the problem was likely to grow bigger in the years ahead.
“It may not be a big deal now, but as gas production increases over time and with continued development and the possibility of a reassessment, it could be a big deal in five years,” White said. “We’d be better served to figure it out now and get it all straightened out.”