Act 13, the 2012 state law governing oil and gas drilling in Pennsylvania, will be on the chopping block before the state’s Commonwealth Court when it considers the “severability” of the law.
In December, the state Supreme Court sided with several municipalities, including Cecil, Mt. Pleasant, Peters and Robinson townships in Washington County, and ruled that key provisions of the law were unconstitutional. Now, the million dollar question is whether the impact fees included in Act 13 that have generated never-before-seen sums of cash for communities also in the Marcellus Shale region will be allowed to stand.
The Supreme Court struck down some provisions of Act 13 that stripped powers from municipal governments to decide where drilling could occur. Gov. Tom Corbett’s administration then asked the court to reconsider its decision, with the Public Utility Commission and Department of Environmental Protection both arguing that more evidence should be considered. The court has not indicated if it will again hear the matter.
The Supreme Court also remanded several provisions back to the lower court for consideration, including the severability of Act 13, or whether the unchallenged provisions of the law can hold up without the remainder. The court’s opinion seemed to suggest some provisions could operate independently.
“We recognize that certain … provisions we have held to be unconstitutional represent core aspects of Act 13,” read the Supreme Court’s opinion. “But, by the same token, several provisions appear relatively independent of other parts of Act 13.”
Of those provisions, the court cited the impact fee on unconventional gas wells and appropriations for the Marcellus Legacy Fund, a pot of money collected from both impact fees and gas royalties. The impact fee is collected in lieu of a severance tax.
Patrick Henderson, deputy chief of staff and energy executive in Gov. Corbett’s office, said the administration is anticipating the results of the lower court proceeding.
“The unknown is that Supreme Court did remand the whole law back to Commonwealth Court and told them to basically have a hearing and determine whether the rest of Act 13 should be struck down,” Henderson said. “That’s a legal question that will play out, (and) it will take quite some time for that to play out.”
State Sen. Tim Solobay, D-Canonsburg, said it would “be a shame” if the impact fees were struck down because they have afforded opportunities to communities that couldn’t have funded projects through their general budgets.
“With the Supreme Court’s ruling on Act 13, the impact fee is (potentially) going to be adjusted or be affected, as well,” Solobay said. “And will the impact fee money go away? I would hope that’s not the case, but I know that’s still being looked at.”
Impact fees have brought nearly $6 million into Greene County and $9 million into Washington County so far. Pennsylvania is the only state that has enforced an impact fee on drilling development, and some lawmakers have wondered what would replace the impact fee if it were struck down.
State Rep. Pam Snyder, D-Jefferson, said that even if the court strikes down the law, the industry would need to pay its share in another way.
“If it were totally thrown out by the court, everyone would have to go back to the drawing board and come up with some sort of constitutional way to (determine) the proper way that the gas industry should be contributing to the local economy,” Snyder said.
Some lawmakers believe the impact fee could – even should – be replaced by stricter payments in the form of a severance tax.
Senate Democratic leader Jay Costa, D-Allegheny, issued a news release in December applauding the Supreme Court’s opinion. Costa said Act 13 “failed to institute a reasonable shale drilling tax” and took powers away from municipal government.
“We left too much control in the hands of gas drilling companies, and the governor was too lenient in dealing with energy companies at the expense of Pennsylvania’s citizens and our communities,” Costa said in the news release.
Henderson countered critiques of the impact fee by saying that money paid by the industry is going directly back into local government, not to Harrisburg. He described the upcoming court proceedings as a “three-legged stool,” in which one of the legs, the zoning provisions, has already been knocked off.
Now, the court must decide if the remaining legs of the law – impact fees and environmental regulations – can stand on their own.
“The court won’t necessarily be looking at those on their merits,” Henderson said, but rather, looking “at the balancing test that the Legislature should apply.”