PIOGA - Pennsylvania Independent Oil and Gas Association

07/07/2019 | Press release | Archived content

Westmoreland municipalities count on windfall from natural gas impact fee

For communities across Westmoreland County, Act 13 is the gift that keeps on giving.

'I don't know where we'd be without it,' Sewickley Township Supervisor Brian Merdian said.

Of the 65 municipalities in Westmoreland County, Sewickley enjoyed the biggest increase in natural gas impact fee windfall this year - from $148,352 in 2018 to $256,013 in 2019.

'When I saw that, I was shocked. I thought, 'What a blessing,' ' Merdian said.

He attributes the increase to a growth in the number of wells in the township and the addition of the Tenaska Westmoreland Generating Station, a natural gas-fueled power plant in neighboring South Huntingdon.

'The Tenaska plant needs the gas to power it, and we happen to have a good amount under Sewickley Township and drillers know that. We're very amicable to them, and in return they follow our rules and ordinances. It's a win-win situation,' he said.

The impact fee is the annual charge the state applies to each new unconventional well drilled into the Marcellus shale. Some of the money is distributed directly to counties to offset the costs of increased drilling activity. Some is made available to individual communities through grants.

Recently, the Pennsylvania Public Utility Commission announced that the impact fee generated record revenue in 2018 - $251.8 million collected from natural gas producers by April 1.

Per Act 13's provisions, $18.3 million will be taken 'off the top' and given to state oversight agencies, $134.7 million will be distributed to counties and municipalities directly affected by drilling and $89.8 million will be transferred to the Marcellus Legacy Fund.

The legacy fund provides financial support for environmental, highway, water and sewer, rehabilitation of greenways and other projects throughout the state. It is distributed to all counties, regardless of the presence of wells within their borders.

Also this year, $8.8 million more is being distributed to municipalities and counties where producer payments had been withheld during a long-running court case concerning the definition of a 'stripper well,' PUC said.

Broad uses

This year, Westmoreland County will receive $1.5 million in impact fee revenue, and municipalities within the county will receive more than $2 million for a total of $3.6 million, according to the Marcellus Shale Coalition.

County commissioners keep the Act 13 money separate from the general fund and allocate it in three ways -ß discretionary (Westmoreland 911, Westmoreland Conservation District), an account restricted for roads and bridges, and an account restricted for open spaces (farmland preservation, conservation district).

'The impact fee was written purposely broad to allow counties some flexibility in how they use those proceeds,' Commissioner Ted Kopas said. 'The fact that it is purposely broad has allowed us to fund not just specific projects but some general county-related business that has helped offset reliance on county property tax dollars.'

That broadness came under criticism by state Auditor General Eugene DePasquale in a 2016 report accusing some communities of misusing impact fee money. DePasquale called for reforms to Act 13 that would correct the 'lack of clarity' in the law on how the money can be spent. None of the communities audited was in Westmoreland County.

Act 13 stipulates that impact fee money can be spent on, among other things, construction, reconstruction, maintenance and repair of roadways, bridges and public infrastructure; water, stormwater and sewer systems; emergency preparedness and public safety; environmental programs, including parks and recreation; tax reductions; judicial services; and 'the delivery of social services.'

Finding local purposes

Sewickley Township, among the top four receivers of revenue in the county in 2018 and 2019, keeps its Act 13 money separate from the general fund and uses it primarily for road projects and road equipment, Merdian said.

'I'm confident to think that public works would be the majority, if not the sole, beneficiary of this revenue,' Merdian said. 'These monies have really been our lifeline and have kept us afloat.'

Derry Township, while keeping some of the Act 13 money in reserve for emergencies, has two projects in mind for this year's windfall of $299,229 - the Raymond Avenue culvert replacement and two retention ponds, Supervisor David Slifka said.

Both projects are aimed at reducing flooding caused by stormwater runoff in an area of the township bordering the city of Latrobe.

'We look at our priorities every year, so it varies from year to year,' Slifka said. 'We can use it for almost anything except wages.

Slifka said the Act 13 money is crucial because the grant funding the township received for the retention ponds won't be enough to complete the project.

'With all the storms we've been having … infrastructure is what we're really concerned with right now,' he said. 'We've bought equipment in the past. If something breaks down, we know we have the luxury of that impact (fee) money. We're fortunate that we have that buffer, that backup.'

For the second consecutive year, Derry Township is the largest impact fee beneficiary in the county, followed by Washington, Sewickley and South Huntingdon townships.

Article source:Pittsburgh Tribune-Review

Details

Act 13 of 2012 stipulates that 60% of the natural gas impact fee go to counties and municipalities that host drilling activity. The money can be used for 13 broad purposes associated with natural gas production:

1. Construction, reconstruction, maintenance and repair of roadways, bridges and public infrastructure

2. Water, stormwater and sewer systems, including construction, reconstruction, maintenance and repair

3. Emergency preparedness and public safety, including law enforcement and fire services, hazardous material response, 911, equipment acquisition and other services

4. Environmental programs, including trails, parks and recreation, open space, flood plain management, conservation districts and agricultural preservation

5. Preservation and reclamation of surface and subsurface waters and water supplies

6. Tax reductions, including homestead exclusions

7. Projects to increase the availability of safe and affordable housing to residents

8. Records management, geographic information systems and information technology

9. The delivery of social services

10. Judicial services

11. Deposit into the municipality's capital reserve fund if the funds are used solely for a purpose set forth in Act 13 of 2012

12. Career and technical centers for training of workers in the oil and gas industry

13. Local or regional planning initiatives under the act of July 31, 1968, known as the Pennsylvania Municipalities Planning Code

Source: Pennsylvania Public Utility Commission