In a 4-3 decision last
Thursday, the Pennsylvania Commonwealth Court overturned a controversial law
passed five months ago that gave unprecedented privileges to the natural gas
industry. Act 13’s reach stretched from
the fees paid by gas companies for the gas they extract to allowing gas
companies an exemption from any local zoning laws that stood in their way. Ironically, the petition to have Act 13
declared null and void had almost nothing to do with the specter of groundwater
contamination that is often a concern with gas drilling operations. But first, I’ll give you the backstory.
The natural gas in question is contained
in the Marcellus Shale formation, which spans from West Virginia, into southwestern
PA, and then makes a broad swath north and east across much of the northern half
of PA and a bit into southern New York.
The mad rush by gas companies to tap into the Marcellus gas play and get
it to market began about four years ago when updated estimates of the potential
volume of gas in the Marcellus formation were released. The technology to extract the gas, horizontal
drilling and hydrofracturing, has been around for several years, but until the
huge, revised potential volume of gas in the Marcellus came to light, it was
not deemed economically feasible to go after this gas.
Despite there being a modest history of natural gas production in western PA, the Pennsylvania
Department of Environmental Protection (PADEP) was not ready to oversee the current gas
boom in PA, because regulators were unable to put the regulatory infrastructure
in place as quickly as gas companies were able to mobilize the capital
equipment and workers from the Texas gas fields to the PA gas fields. As a result of the PADEP’s slow response to
the Marcellus boom, the spike in gas production from the Marcellus began about
three years before the PA legislature was able to pass a bill that contained a
system for charging drillers a fee for the gas that was being extracted and
sent to market.
Every other gas producing
state has what is called a severance tax that the state charges gas companies
based on the value of gas produced. A
severance tax is imposed by the state and is separate from lease fees and
royalties paid to the landowners.
Instituting a severance tax was debated right up through the 2010 PA
gubernatorial election. However, the
winner of that election, Republican Tom Corbett, made a No Tax pledge as part
of his campaign. It seems that Gov.
Corbett’s No Tax pledge was not just for PA residents. When asked during his campaign about a gas
severance tax, Corbett stated that his No Tax pledge would also apply to a
severance tax for gas companies. Not
coincidentally, Corbett received nearly $1 million in campaign contributions
from gas companies and their lobbyists.
Earlier this year, Corbett
had no trouble getting Act 13 approved by the Republican-controlled PA State
Senate and Legislature. Part of Act 13
included a fee system in which gas companies would be charged by the amount of
gas they produce from wells in PA, but the fee revenue would go to the counties
in which the gas was extracted and not into state coffers (thereby making it a
local service fee rather than a tax levied by the state). Establishing the local severance fee in place
of a state severance tax was an unfortunate missed opportunity for a new
revenue stream in PA that could have funded sorely needed highway
infrastructure repairs as well as providing replacement revenue for cuts in
education and conservation programs made by Corbett while putting together his
balanced budget. But the missed
severance tax opportunity was not what triggered the lawsuit by seven PA
municipalities against Act 13.
The other feature of Act 13 –
the one that created the backlash that landed it in Commonwealth Court last
week – was the section of the Act that prohibited municipalities from enforcing
any local zoning regulations that would have prevented gas companies from
drilling wells where they wanted to put them (assuming, of course, that they
obtained a valid lease with the owner of the land in question). It’s easy for suburbanites in southeastern PA, or the Lehigh Valley, or any other non-gas producing county in PA to feel
like they are unaffected by this provision of Act 13. Well, hold on. It goes further than gas-producing counties,
because Act 13 would also have waived zoning prohibitions for companies gas compressor
stations and gas pipelines. So if a gas
pipeline company wanted to buy a bunch of homes in your subdivision to run a
pipeline through it, your municipality would have been unable to use its zoning
laws to prevent them from doing so. The
zoning regs would still apply to you
if you wanted to demolish your house and build a small asphalt plant where your
1,800 square-foot Cape Cod had stood.
Only gas companies and gas pipeline companies would be exempt from the
zoning laws that apply to all other businesses and individuals in your
municipality.
Predictably, on Friday
afternoon, the Corbett administration filed an appeal of the Commonwealth
Court’s decision of one day earlier.
We’ll now wait to hear whether the PA Supreme Court will agree to hear
Corbett’s appeal. If the Supreme Court
agrees to hear Corbett’s appeal, I hope they understand that zoning laws are not a burden on landowners seeking to use their property as they wish; rather, zoning laws are the first line of defense for landowners to be protected from potentially poor land use decisions by their neighbors.
I also hope that the high court takes to
heart one particular portion of the Commonwealth Court’s ruling, which found
that Act 13 was in defiance of Article 1, Section 27, of the Pennsylvania
Constitution:
"The people have
a right to clean air, pure water, and for the preservation of the natural,
scenic, historic and aesthetic values of the environment. Pennsylvania's public
natural resources are the common property of all the people. …"
And
I’m pretty certain that the framers of our state constitution did not count corporations
– whether they are from in-state or out of state – among the “people” of
Pennsylvania.
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