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Scarnati reveals proposal for fee on Marcellus Shale

HARRISBURG - It is a fee, not a tax. It helps upstate Pennsylvania communities directly impacted by natural gas drilling rather than those that want to build parking garages or monuments to politicians.

HARRISBURG - It is a fee, not a tax.

It helps upstate Pennsylvania communities directly impacted by natural gas drilling rather than those that want to build parking garages or monuments to politicians.

And most important, Senate President Joe Scarnati (R., Jefferson) said Thursday, it is political realism.

With those arguments, Scarnati unveiled details of what will soon become the first black-and-white proposal in Harrisburg for a "local impact fee" on the extraction of natural gas from the Marcellus Shale.

The plan, he acknowledged, doesn't have a green light from Gov. Corbett. But it doesn't have a red light either.

"At this point," said Scarnati, "I can say I have a caution light."

Corbett has steadfastly said he will not accept a proposal that calls for imposing a new tax on natural gas extraction. He has said, however, that he would consider a local impact fee, provided the money goes to communities where drilling is occurring.

Corbett spokesman Kevin Harley on Thursday was noncommittal about Scarnati's proposal for such a fee, saying the governor also wants to wait to hear what his Marcellus Shale Advisory Commission will recommend in its report, due in early July.

"The governor has said he would look at an impact fee. He never said he would endorse it," said Harley, adding that any decision on gas drilling "needs to be well-thought-out and well-designed."

Scarnati's plan, for the most part, seems to stick to the broad parameters laid out by the governor, a fellow Republican.

It calls for imposing a base fee of $10,000 for every drilling well, but that number would increase based on production and the price of natural gas.

In all, Scarnati projects that will translate into $45 million for 2010 (the fee would be retroactive), $76 million this year, and $103 million next year.

The lion's share of the money, which would be collected by the state Public Utility Commission, would go straight to drilling-heavy municipalities and counties.

A portion of the money - there are no exact breakdowns yet - would go to conservation districts across the state, as well as statewide environmental and infrastructure projects.

Scarnati said he hoped to get a vote on his plan in the General Assembly by June, and said public pressure on the legislature to finally reach a consensus on how best to deal with the growing industry would help fuel the effort. Several polls have found a majority of Pennsylvania voters favoring a tax on the drillers as a way to help offset the state's $4 billion deficit.

"I cannot see how we get the state budget done, with the cuts that are coming in it, without additional dollars coming from the industry," Scarnati said.

The industry has said it is open to a reasonable levy, and on Thursday this statement came from Kathryn Klaber, president of the Marcellus Shale Coalition: The coalition "has made a commitment to being responsible members of the communities in which we work. Accordingly, we are open to discussing . . . proposals that focus on strengthening our partnership with municipal governments, while providing funds to local communities."

In the legislature, however, there is still bound to be a fight.

Democrats have rallied around a statewide extraction tax, and believe it is the best way to get drillers to pay their fair share. Rep. Greg Vitali (D., Delaware) is pushing legislation that would impose a tax of about 6 percent of the market value of the gas.

Republicans have been more nuanced in their position. Last year, Senate Republicans, led by Scarnati, threw their support behind a modest severance tax proposal. Now that Corbett is governor, however, many say they need to be realists and not push something they know he would veto.

Still, notwithstanding Corbett's druthers, at least one powerful GOP senator says a statewide severance tax is the best way to go.

"In my view, the tax needs to benefit the entire commonwealth, just as the extraction tax in every other state benefits the entire state in those jurisdictions," Majority Leader Dominic Pileggi (R., Delaware) said Thursday.

Pennsylvania is the largest gas-producing state without such a tax.

Then there is the House. Republicans who control that chamber were noncommittal Thursday about Scarnati's proposal. Said Steve Miskin, spokesman for House Majority Leader Mike Turzai (R., Allegheny): "It is an interesting proposal that we will consider for further staff review."

In political-speak, that is the polite equivalent of "Thanks, but no thanks."

Environmental groups said they were heartened that a powerful legislator was finally stepping up with a proposal, but were disappointed with its content. David Masur, director of PennEnvironment, said Scarnati's fee proposal "feels like a step backward in the dialogue." He said other proposals were "much more in line with what other states are doing."

For his part, Scarnati, whose northwestern Pennsylvania district is home to some of the drilling, said the legislature will gain nothing by pushing a proposal it knows Corbett will reject.

"It's a balancing act," he said, adding that he thinks his plan hits "that sweet spot" to bring all sides to the table.