Marcellus Shale legislation impacts local governments

Marcellus Shale legislation, recently signed by Gov. Tom Corbett, created fees to be paid by gas producers and made substantial strides towards closer regulation of these new drilling activities.

PAR will highlight a few aspects of the law that will be of importance to Realtors® in a series of articles.  This one discusses some of the local governance issues in the law, while the next will address some issues that could affect future transactions.

The law is an enabling statute that allows local government to impose a fee without requiring them to do so.  The state isn’t automatically imposing the impact fee on all drillers but is setting up the structure to allow county or municipal governments to decide whether or not to impose the fee.

County governments are collecting public input as to whether they should vote for or against the impact fee. County governments that host drilling activities have until April 13 to decide whether to authorize the impact fee for 2012. If they don’t enact the fee within that time, municipal governments within those counties have another 60 days – until June 12 – to overrule the county with votes from either a majority of the municipalities, or from municipalities with a majority of the population of the county.

Why might this matter to you?  The majority of the funds received from the impact fee will be routed back for use at the county and municipal levels. There are a number of permitted uses for the funds – including housing programs – which are designed to offset the impact of drilling and to improve your local communities.  But if the fee is not imposed by the county, money is not returned to the county.  Even if municipalities overrule the county, the municipalities that vote in favor of the fee will receive funding, but the county and non-approving municipalities will not. If your local governments don’t act within the 60/120-day timelines, they can still impose the impact fee but wouldn’t be eligible to receive funds until fees are collected in 2013.

Zoning

Your local political scene might also be buzzing about the way in which the new law preempts local regulation of the activities related to Marcellus drilling.  This is an extension of the restrictions that have historically applied to traditional drilling through the Oil and Gas Act. However, the new law goes further and restricts how municipal governments can regulate the activities that are ancillary to the drilling itself.

The law now requires municipalities to regulate in a way that allows the “reasonable development of oil and gas resources.” For example, a municipal government cannot regulate things like noise, lighting and screening any more stringently for gas operations than they do for any other activity, and they must allow almost all oil and gas activities as a permitted use in every zoning category.

Municipalities have until June 12 to repeal existing ordinances that may be in conflict with these new rules. If they don’t, or if they enact new rules that violate the law, the municipality loses its eligibility for any funds until the ordinance is repealed. Complaints about ordinances would be filed either with the Public Utility Commission (which has oversight over substantial portions of the law) or directly with Commonwealth Court and if the court finds that the municipality deliberately disobeyed the law, they can be ordered to pay attorneys’ fees as part of the judgment.

What does it all mean?

This law has a lot of carrots – and a few sticks – for local governments.  But they don’t have the luxury of waiting around to see how things will play out. There’s a lot for county and municipal representatives to do in the next four months and a lot of new things for them to understand.  Everyone will need to get up to speed as quickly as possible to make the necessary decisions.