THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY ELLIS, REED, GERGELY, BARRAR, BENNINGHOFF, BURNS, CALTAGIRONE, CHRISTIANA, D. COSTA, DEASY, DeLUCA, EVERETT, GABLER, GALLOWAY, GIBBONS, GROVE, M. K. KELLER, MAHONEY, MAJOR, PEIFER, PICKETT AND SCAVELLO, JUNE 21, 2011

REFERRED TO COMMITTEE ON APPROPRIATIONS, JUNE 21, 2011  

AN ACT

Authorizing an unconventional gas well impact fee in counties

where unconventional wells are located; providing for

distribution of the fee and for the powers and duties of the

Pennsylvania Public Utility Commission.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the

Unconventional Gas Well Impact Fee for Local Governments Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Association."  A partnership, limited partnership or any

other form of unincorporated enterprise owned or conducted by

two or more persons.

"Coal bed methane."  Gas that can be produced from coal beds,

coal seams, mined-out areas or gob wells.

"Commission."  The Pennsylvania Public Utility Commission.

"Construction."  The point in time when well drilling

operations are completed.

"Corporation."  A corporation, joint stock association,

limited liability company, business trust or any other

incorporated enterprise organized under the laws of the United

States, this Commonwealth or any other state, territory or

foreign country or dependency.

"Municipality."  A city, borough, incorporated town or

township.

"Natural gas."  A fossil fuel consisting of a mixture of

hydrocarbon gases, primarily methane, possibly including ethane,

propane, butane, pentane, carbon dioxide, oxygen, nitrogen and

hydrogen sulfide and other gas species. The term includes gas

from oil fields known as associated gas or casing head gas,

natural gas fields known as nonassociated gas, coal beds, shale

beds and other formations. The term does not include coal bed

methane.

"Nonproducing well."  A natural gas well that does not

produce natural gas in excess of 90,000 cubic feet per day.

"Operator."  A person or its subsidiary, affiliate or holding

company that holds a permit or other authorization to engage in

the business of severing natural gas for sale, profit or

commercial use from an unconventional gas well in this

Commonwealth. The term does not include a person who severs

natural gas from a storage field.

"Person."  A natural person or a corporation, fiduciary,

association or other entity, including the Commonwealth and any

of its political subdivisions, instrumentalities and

authorities. When the term is used in a provision prescribing

and imposing a penalty or imposing a fine or both, the term

shall include a member of an association and an officer of a

corporation.

"Rate."  The rate under section 3.

"Reporting period."  The fiscal year in which an

unconventional gas well impact fee is assessed.

"Unconventional gas well."  A bore hole drilled or being

drilled for the purpose of or to be used for producing oil or

gas from a geologic formation existing below the base of the Elk

Sandstone or its geologic equivalent stratigraphic interval

where oil or gas generally cannot be produced at economic flow

rates or in economic volumes except by wells stimulated by

hydraulic fracture treatments, a horizontal well bore or by

using multilateral well bores or other techniques to expose more

of the formation of the well bore.

"Unconventional gas well impact fee."  The fee authorized

under section 3 on each unconventional gas well producing

natural gas within this Commonwealth and is calculated and

distributed as a means to defray the impacts on the environment

and infrastructure where such unconventional gas wells are

located.

Section 3.  Unconventional gas well impact fee.

(a)  Authorization.--Beginning July 1, 2011, except as

otherwise provided in subsection (b), a county may by resolution

and subject to the provisions of this section impose and collect

an unconventional gas well impact fee on every unconventional

gas well for which construction has been completed in this

Commonwealth.

(b)  Exemptions.--The unconventional gas well impact fee

shall not be imposed on:

(1)  nonproducing wells; or

(2)  unconventional gas wells in which the natural gas is

used directly by a consumer.

(c)  Rate.--Upon completion of the construction of an

unconventional gas well, the unconventional gas well impact fee

shall be assessed annually on the unconventional gas well

beginning in the year construction was completed and based upon

the following schedule:

(1)  Years 1 and 2 - $25,000.

(2)  Years 3 through 10 - $10,000.

(d)  Cessation.--The annual payments shall cease upon:

(1)  certification to the county in which the

unconventional gas well is located by the operator that the

unconventional gas well has ceased production and has been

plugged according to the regulations established by the

Department of Environmental Protection.

(2)  The 11th year after completion of the construction

of the unconventional gas.

(e)  Existing wells.--

(1)  An operator shall be required to remit the

unconventional gas well impact fee for all unconventional

wells in existence on the effective date of this section.

(2)  The amount of the unconventional gas well impact fee

to be remitted shall be calculated using the year the

unconventional well was constructed that corresponds with the

schedule in subsection (c).

(f)  Re-opened wells.--

(1)  In the event an operator re-opens a previously

capped unconventional gas well and places the well into

production the amount of the unconventional gas well fee

shall be calculated using the year the unconventional well

was originally constructed that corresponds with the schedule

in subsection (c).

(2)  In the event that the unconventional gas well was

originally constructed more than ten years prior to being

reopened, the unconventional gas well impact fee shall be in

the amount of $10,000 annually until the operator ceases

production and plugs the unconventional gas well in

accordance with regulations of the department.

(g)  Prohibition.--

(1)  Under no circumstances may an operator make an

unconventional gas well impact fee, or any other levy related

to the removal or extraction of natural gas or other natural

resource, an obligation, indebtedness or liability of a

landowner, leaseholder or other person in possession of real

property upon which such removal or extraction occurs.

(2)  An agreement between an operator and a landowner,

leaseholder or other person in possession of real property

upon which removal or extraction of natural gas occurs that

violates paragraph (1) shall be null and void.

Section 4.  Return and payment.

(a)  General rule.--An operator in a county that imposes the

unconventional gas well impact fee shall file a certificate with

the county in which the operator of an unconventional gas well,

on a form prescribed by the county, which shall include a list

by municipality of the total number of unconventional gas wells

owned by the operator in the county for the reporting period.

The operator shall also submit to the county treasurer the

amount of the unconventional gas well impact fee due at the time

the certificate is submitted.

(b)  Filing.--The certificate required by subsection (a)

shall be filed with the county within 30 days following the end

of a reporting period. The operator may submit the

unconventional gas well impact fee due on a quarterly basis on a

schedule approved by the county.

(c)  Deadline.--The unconventional gas well impact fee shall

be due on the day the certificate is required to be filed and

shall become delinquent if not remitted to the county by that

date.

Section 5.  Penalties.

(a)  Failure to file a timely certificate.--An operator who

willfully fails to file a timely certificate shall be assessed

an administrative fine equal to 100% of the unconventional gas

well impact fee liability required to be reported on the

certificate. The county in which the unconventional gas well is

located and which imposes the unconventional gas well impact fee

shall enforce this penalty.

(b)  Fraudulent certificate.--Any person, with intent to

defraud the county that imposes the unconventional gas well

impact fee, who willfully makes or causes to be made a

certificate required by this act which is false, shall, upon

finding by the relevant county, be ordered to pay an

administrative fine of not more than 100% of the liability.

(c)  Penalties or other acts.--

(1)  Except as otherwise provided by subsection (a), an

operator shall be ordered to pay a fine of not more than

$50,000 and costs of prosecution for any of the following:

(i)  Willfully failing to timely remit the

unconventional gas well impact fee to the county.

(ii)  Willfully failing or neglecting to timely file

a certificate or report required by this act.

(iii)  Refusing to timely pay a penalty or interest

imposed or provided for by this act.

(iv)  Willfully failing to preserve its books, papers

and records as directed by the county.

(v)  Refusing to permit the county or its authorized

agents to examine its books, records or papers.

(vi)  Knowingly making any incomplete, false or

fraudulent certificate or report required by this act.

(vii)  Preventing or attempting to prevent the full

disclosure of the amount of unconventional gas well

impact fee due.

(viii)  Providing any person with a false statement

as to the payment of the unconventional gas well impact

fee with respect to any pertinent facts.

(ix)  Making, uttering or issuing a false or

fraudulent statement required by this act.

(x)  Entering or attempting to enter into an

agreement that violates section 3(e)(1).

(2)  The penalties imposed by this section shall be in

addition to other penalties imposed by law.

Section 6.  Recordkeeping.

(a)  Records.--Every person responsible for the collection

and remittance of the unconventional gas well impact fee shall

maintain records, statements and other instruments as the county

that imposes the unconventional gas well impact fee may

prescribe.

(b)  Examinations.--A county that imposes the unconventional

gas well impact fee or any of its authorized agents may:

(1)  Examine the books, papers and records of any

operator of an unconventional gas well in the county in order

to verify the accuracy and completeness of the unconventional

gas well impact fee submitted or reported.

(2)  Require the preservation of all books, papers and

records for any period deemed proper by it, but not to exceed

five years from the end of the calendar year to which the

records relate.

(3)  Examine any person, under oath, concerning any

matter relating to the enforcement or administration of this

act, and to this end, may compel the production of books,

papers and records and the attendance of all persons whether

as parties or witnesses whom it believes to have knowledge of

relevant matters.

(c)  Duties of operators.--Every operator shall provide a

county in which the unconventional gas well is located and which

imposes the unconventional gas well impact fee or its agent with

the means, facilities and opportunity for examinations and

investigations under this section.

(d)  Unauthorized disclosure.--

(1)  Any information gained by a county as a result of

any certificate, examination, investigation, hearing or

verification required or authorized by this act shall be

confidential, except for official purposes, or in accordance

with proper judicial order or as otherwise provided by law.

(2)  Any person who unlawfully divulges information

required to be kept confidential under this act shall, upon

conviction thereof, be sentenced to pay a fine of not more

than $1,000 and costs of prosecution.

Section 7.  Deposit and distribution of fee.

(a)  Establishment of account.--Each county imposing and

collecting the unconventional gas well impact fee shall

establish a separate, restricted account for the deposit of all

moneys collected under this act.

(b)  Distributions.--The money collected from the

unconventional gas well impact fee by a county shall be

distributed by the county treasurer as follows:

(1)  Thirty percent of the moneys shall be retained by

the county. These funds may be used by the county for

projects that will provide for watershed protection or

improvements, or flood control and flood plain management.

(2)  Thirty percent of the moneys shall be provided to

the municipalities in which the unconventional gas wells are

located. These moneys shall be prorated based upon the number

of unconventional gas wells located within each municipality.

A municipality shall utilize these moneys for construction or

maintenance of infrastructure within the municipality that

ameliorates the impact of unconventional gas well

development.

(3)  Twenty percent of the moneys shall be provided to

the municipalities in which no unconventional gas well is

located. A municipality shall utilize these moneys for

construction or maintenance of infrastructure within the

municipality that ameliorates the impact of unconventional

gas well development.

(4)  Fifteen percent of the moneys shall be provided to

school districts within the county. The moneys shall be

prorated among the school districts based upon an average

daily membership. In instances where a school district

encompasses more than one county in which unconventional gas

wells are located, the moneys shall be distributed on a

prorated basis and based upon the number of students who

reside in each county. These funds shall be used for local

property tax reductions.

(5)  Five percent of the moneys shall be provided to the

county conservation district.

(c)  Municipal budget limitation.--In the event the moneys

received exceed the municipality's annual budget in amount of

two times or higher, the excess funds may only be allocated and

be used for local tax reductions, including homestead

exclusions, as determined by a majority vote of the governing

body of the municipality.

Section 8.  Calculation of payments.

A county treasurer of a county that collects the

unconventional gas well impact fee shall:

(1)  Certify the number of all unconventional gas wells

located within each municipality based upon the appropriate

reports provided by the Department of Environmental

Protection and information provided by the operators of

unconventional gas wells.

(2)  Pay to each municipality in which unconventional gas

wells are located an amount equal to the total number of

unconventional gas wells located within the municipality

based on the fee schedule established in section 3.

(3)  Pay to each municipality in which unconventional gas

wells are not located an amount equal to the distribution

formula established in section 7(b)(3).

Section 9.  Report.

(a)  General rule.--Commencing in calendar year 2012 and each

year thereafter, before December 1, each county that collects

the unconventional gas well impact fee shall prepare and deliver

a report to the Secretary of the Senate and the Chief Clerk of

the House of Representatives detailing the expenditure of the

funds.

(b)  Audit.--The Department of Community and Economic

Development may audit a county's and municipality's expenditure

of the unconventional gas well impact fee.

(c)  Availability of records.--A county and municipality that

expends any portion of the unconventional gas well impact fee

shall make its financial records and other documents relating to

its expenditure of the unconventional gas well impact fee

available to the Department of Community and Economic

Development.

(d)  Report.--Each municipality that receives any portion of

the unconventional gas well impact fee shall prepare and deliver

a report to the county commissioners of the county detailing the

expenditure of the unconventional gas well impact fee received,

which information shall be included in the report required under

subsection (a). The report of the county commissioners shall

specifically justify the manner in which moneys expended under

section 7(b)(2) and (3) ameliorates the impact of unconventional

gas well development. 

Section 10.  Model municipal ordinance.

(a)  Purposes.--The purposes of this section are:

(1)  To optimize the development and use of this

Commonwealth's oil and gas reserves by increasing reasonable

consistency in zoning and other municipal regulation.

(2)  To foster expeditious and efficient handling of

municipal oil and gas permitting procedures.

(3)  To allow municipalities to enact regulations under

the act of July 31, 1968 (P.L.805, No.247), known as the

Pennsylvania Municipalities Planning Code, and the act of

October 4, 1978 (P.L.851, No.166), known as the Flood Plain

Management Act, insofar as the regulation is authorized by

law and this section.

(b)  Authority.--The commission shall develop and adopt a

model ordinance to fulfill the purposes of this section.

(c)  Adoption of provisions.--

(1)  Within 120 days of the effective date of this

section, the commission shall, by majority vote, adopt a

model ordinance for counties and municipalities pertaining to

oil and gas drilling activities in accordance with the

Pennsylvania Municipalities Planning Code, as applicable, the

Flood Plain Management Act and this section.

(2)  The model zoning ordinance shall do all of the

following:

(i)  Authorize oil and gas development as a permitted

use by right in all zoning districts except residential

districts. The model zoning ordinance may allow oil and

gas development in residential zoning districts by

conditional use or special exception with conditions

dependent on the density of existing uses within the

district and the isolation distances achievable in each

residential district.

(ii)  Authorize natural gas compression stations:

(A)  as a permitted use by right in all

agricultural, industrial and commercial districts;

and

(B)  as a conditional use in all other zoning

districts.

(iii)  Authorize natural gas processing plants:

(A)  as a permitted use by right in all

industrial districts; and

(B)  as a conditional use or special exception in

agricultural districts.

(3)  The model zoning ordinance may not:

(i)  Impose limitations on the hours of operation on

drilling operations.

(ii)  Impose limitations on noise, light, height or

security or fencing on drilling operations, natural gas

compressor stations or natural gas processing plants if

the limitations are more stringent than limitations

imposed on construction activities for other similar land

uses. The model zoning ordinance may include limitations

on noise, light, height and security and fencing for

equipment or processes which are unique to the gas

industry and which are rational, nondiscriminatory and

reasonably defensible in the particular zone where they

apply.

(iii)  Have a permit review period for uses by right

that exceeds 30 days for complete and responsive

submissions.

(iv)  Impose restrictions on vehicular access routes

for overweight vehicles except as authorized under:

(A)  75 Pa.C.S. (relating to vehicles); or

(B)  the Pennsylvania Municipalities Planning

Code.

(v)  Regulate storm water, erosion and sedimentation

control or grading where the use is subject to regulation

by the Department of Environmental Protection through an

Erosion and Sedimentation Control General Permit or

similar permit.

(4)  Nothing in this subsection shall be construed to

limit or preempt a county or municipality from action

pursuant to the act of October 4, 1978 (P.L.864, No.167),

known as the Storm Water Management Act.

(d)  Effect of model zoning ordinance.--If an ordinance

adopted by a county or municipality contains more stringent

standards than the model ordinance, the county or municipality

shall be ineligible to receive funding under section 7.

(e)  Timing.--The commission shall publish the adopted model

zoning ordinance in the Pennsylvania Bulletin immediately after

its adoption and shall disseminate information about the model

zoning ordinance through the Department of Community and

Economic Development, municipal associations and other means as

the commission shall deem appropriate. The costs of the

notification shall be borne by the Department of Community and

Economic Development.

(f)  Miscellaneous.--The commission shall review the model

zoning ordinance annually. Proposed amendments shall be

published in the Pennsylvania Bulletin within 30 days after

their adoption.

(g)  Effective date of model zoning ordinance.--The model

zoning ordinance shall take effect 70 days following the

commission's publication of the ordinance in the Pennsylvania

Bulletin under this section.

Section 11.  Construction.

Nothing in this act shall be construed to impair or infringe

upon the preemption or supersedure of the regulation of gas

wells under section 602 of the act of December 19, 1984

(P.L.1140, No.223), known as the Oil and Gas Act.

Section 12.  Effective date.

This act shall take effect in 120 days.