On February 14, 2012, then-Pennsylvania Governor Tom Corbett signed Act 13 [PDF] into law. It amended Title 58 of the Pennsylvania Consolidated Statutes to include a fee for individuals or corporations extracting natural gas from geologic formations such as Marcellus Shale.
The purpose of the act was to encourage stronger protection of the environment during the drilling of unconventional wells—these [PDF] are wells from which natural gas, in the form of methane, is extracted out of the subterranean shale formation. Act 13 proposes that producers of natural gas who employ this method must pay a fee, which is both collected and disbursed by the Pennsylvania Public Utility Commission.
Act 13 addresses some of the legal complexities that have arisen out of the recent practice of fracking. Drilling through shale to extract natural gas is a process known as hydraulic fracturing or “fracking.” The process involves drilling a borehole from the surface ground to the geologic formations below to pump a pressurized mixture of water, sand and other materials into the shale, which fractures the shale and frees the methane to be extracted for use as a source of energy.
The controversy surrounding the practice of fracking stems from a variety of public concerns over the effects of gas extraction on the safety of ground water, methane leakage, effects on the air quality around drilling sites, effects on the environment from the disposal of the wastewater and disproportionate economic impact, among others.
In Pennsylvania, the realization of shale’s potential as a medium for extracting natural gas precipitated a change [PDF] in industry practices that rendered existing oil and gas regulations in the state, under Title 58, outdated. Advances in technology and scientific understanding in the field further obviated the need for new law. When proposals to amend the anachronisms in Title 58 began to gain momentum in the state legislature, gas companies had already taken [PDF] advantage of fracking’s tax-exempt status in Pennsylvania for “nearly four years.” Despite the desire to address this legal loophole, the passage of the Act, as the legislative history indicates, remained contentious in both chambers of the Commonwealth’s General Assembly. Representatives recognized that the Act was not without its difficulties; principal among these foreseeable problems was the negative impact on local autonomy over zoning laws and the lack of restrictions on air pollution. Contrarily, other representatives worried not about the operations of local government, but instead worried that taxing the companies would cause them to leave. The legislation agreed upon proposed assessing the impact fee “based on the price of natural gas” and would be levied [PDF] annually. In return, the impact fees collected [PDF] from the drilling operations would be distributed to the local municipalities and counties where shale drilling occurred. The funds, proponents of the bill argued, could be used for a wide array of state interests [PDF] including social services, housing projects, and environmental programs, among others. After reconciling differences, and conceding that some of the Act’s drawbacks were outweighed by its socio-economic benefits, the Act passed in the legislature and was signed into law.