Professors issue report on Marcellus shale impact fees

Two Pitt-Bradford professors have issued a report on how Marcellus Shale impact fees are used and accounted for in Pennsylvania.

Dr. Shailendra N. Gajanan, professor of economics, and Dr. Stephen F. Robar, associate professor of political science, received a grant from the Center for Rural Pennsylvania to study the matter.

The center is a legislative agency and awards grants to academic researchers to study questions of interest to the Pennsylvania General Assembly.

In 2012, Pennsylvania put into place a fee for new gas wells being drilled in the Marcellus Shale via a relatively new technology called fracturing. The new technology was allowing new wells to be drilled in areas of Pennsylvania that had earlier not been considered productive gas fields.

Representatives from municipalities and counties where new wells were being drilled asked the legislature for help in paying for infrastructure such as roads and bridges that received heavy truck traffic, emergency preparation for spills or explosions, and work to accommodate runoff.

The impact fee was created to help those municipalities and counties, and about 60 percent of the fees collected go to counties and municipalities where drilling has occurred or next to a municipality in which drilling has occurred.

Gajanan and Robar examined municipalities and counties' annual financial statements for 2007-09 and 2011-13, when drilling activity began to rise in Pennsylvania. They found that, on average, municipalities and counties were paying more for roads and police coverage.

The pair then examined the difference in expenditures in municipalities and counties that had Marcellus drilling versus those that didn't and found that in the municipalities and counties without drilling there wasn't an increase in expenditures for roads and police coverage.

Finally, they asked municipal and county representatives to fill out a survey about how they spent or intended to spend their money from the impact fees. Most municipalities and counties, they found, spend their money on the same things - chiefly infrastructure, emergency preparedness, stormwater and sewer systems, and judicial services.

Municipalities and counties as a whole also placed a third of the funds in capital reserve to use on future projects.

On the whole, Gajanan and Robar found that the financial impact of Marcellus Shale drilling on municipalities and counties was real and that those governments spent the money in the way they had said they would.

However, in their review of financial records, Gajanan and Robar did not separate income lines for the impact fees, which were often co-mingled with other funds. Therefore, they recommended that the legislature investigate requiring a stronger reporting structure to ensure that funds are spent in the way intended.

They also noticed that although municipalities and counties with wells get the majority of the impact fees, nearby communities can be affected but not receive funds. For example, a remote township where wells are being drilled may receive impact fees, but a borough 20 miles away might not receive additional funds, even though it is bearing the burden of housing most of the workers for that well project.

Consequently, Gajanan and Robar also recommended that the legislature devise a more equitable formula to distribute money to all municipalities and counties feeling the effect of Marcellus Shale drilling.

The professors' publication, “Analysis of Act 13 Spending by Pennsylvania Municipalities and Counties” can be found at www.rural.palegislature.us/publications_reports.html under “Reports.”

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