Lycoming County and its 52 municipalities can expect to receive about $10 million in gas well impact fee revenue this year.
But with the needs of those entities far exceeding expected revenue, stakeholder cooperation is essential for the county to get the best bang for its buck, according to county Commissioner Jeff C. Wheeland.
Wheeland spoke Monday during informational meetings hosted by the county at the Williamsport Regional Medical Center. The meetings were held to educate stakeholders about impact fee revenue and its potential uses.
A full house is evident at the Williamsport Regional Medical Center Walnut Room during Monday afternoon’s impact fee session.
Countywide, about $2 billion in needs, including improvements or expansions of roads, bridges and water and sewer infrastructure, have been identified, Wheeland said.
" 'Coordination' is probably the most important word," he said. "We want to coordinate the efforts of all the municipalities to optimize the best use of this limited resource."
Two meetings were held to allow as many municipal officials as possible to attend, Wheeland said. The first meeting attracted more than 100 people, including municipal officials and representatives of local human service agencies, water and sewer authorities and state government.
A presentation was given by William Kelly, deputy director of the county Department of Planning and Community Development, and John Mizerak, a principal with Mechanicsburg-based consulting firm Delta Development.
According to Kelly, impact fee legislation pertains to unconventional gas wells, which are wells drilled into unconventional formations such as shale, and with which methods such as horizontal drilling and hydrofracturing are used. About 471 such wells were in the county as of Dec. 31, he said.
Fees are based on a formula that takes into account the preceding year's average gas price, Kelly said.
The fee is levied on each well for 15 years and is collected on a diminishing scale that calls for the most money to be collected during the first year and the least during the final year, he said.
For example, a well drilled in 2011, when the median price of natural gas is between $3 and $4.99 per 1,000 cubic feet, would be assessed a fee of $50,000 for the first year. The second year fee for the same well would drop to $40,000, the third, $30,000, and so forth, until the last several years the fee would be $10,000.
Fee revenue will be divided between the state, county and local municipalities, Kelly said.
The fee is applicable from the moment drilling begins on the well, he said.
"The clock starts when the drilling begins," he said.
According to Mizerak, the state will take $23 million "off the top" of total fee revenue.
It will use that money to fund agencies that deal with industry impacts and oversight such as county conservation districts, the state Fish and Boat Commission, Public Utilities Commission, Department of Environmental Protection, Emergency Management Agency, Office of the State Fire Commissioners and Department of Transportation.
After the amount taken off the top, the remaining revenue will be divided between the state, which will receive 40 percent, and local governments, which will receive 60 percent.
The state's share will be used to fund the Commonwealth Financing Authority, Environmental Stewardship Fund, Highway Bridge Improvement Fund, state Infrastructure Investment Authority, and Department of Community and Economic Development, all of which may provide some type of funding to impacted counties, Mizerak said.
Of the revenue going to local government, $2.5 million will be "taken off the top" for the Pennsylvania Housing Finance Administration and 36 percent of the remaining revenue it goes to counties with gas wells, 37 percent to municipalities in those counties with gas wells and 27 percent to all municipalities in those counties regardless of whether there are gas wells in them.
Of that final slice of the impact fee revenue pie, half will go to all municipalities and half to municipalities with wells, that border municipalities with wells or are within five linear miles of a drilled well, Mizerak said.
The county is expected to receive slightly more than $3.7 million by Dec. 1, Kelly said. The allocation to local municipalities is estimated to be about $6.7 million.
Revenues next year should be somewhat lower because of depressed gas prices, he said.
The state Public Utilities Commission will manage the collection of impact fees and the distribution fee revenue to eligible government entities. Eligible uses for fee revenue includes roads, bridges, water, stormwater and sewer, water supplies, capital reserve funds, public safety, environmental programs, tax reductions, records management, social services, judicial serves, career training and municipal planning.
Impact fee legislation includes a cap in which a municipality may receive no more than $500,000 or 50 percent of its previous year's budget, whichever is bigger. Fee revenue exceeding the cap limit will go to the PHFA and will be used for affordable housing initiatives in impacted counties, Kelly said.
The law is not a severance tax, nor does it allow gas companies to disregard requirements to repair damage to bonded roads, Kelly said.
Counties may adopt the legislation by enacting an ordinance by April 16, Kelly said. Municipalities may override the ordinance by adopting a resolution, he said. Counties that do not adopt the ordinance can be compelled to do so if more than half of municipalities in that county adopt a resolution supporting the fee, Kelly said.
The county commissioners are expected to enact the ordinance on Thursday, Wheeland said.
Impact fee legislation is not perfect, Wheeland said. However, it does provide local government with a wide range of flexibility in how it uses the revenue. It also allows municipalities and the county to work together to ensure the completion of high priority projects.
For example, two municipalities can partner together to repair or replace a bridge that residents of both communities use, he said.
That collaboration is needed most now because local governments can expect little help from leaders in Washington, D.C., or Harrisburg, he said.
"I was in Washington, D.C., - there is no money. I was Harrisburg - there is no money," he said. "We really need to think outside the box and decide how we can leverage (fee revenue). We're on our own here."