Nov 22, 2012 3 min read

One of the most important and positive aspects of Act 13, which amended Pennsylvania’s Oil and Gas laws, is the financial benefit our municipalities will receive from the natural gas impact fees. However, what should these local governments to do with their new-found resources?

As you are aware, Act 13 empowered county governing bodies to levy an impact fee on unconventional gas wells. The fee is complicated, but, basically, it is assessed on each unconventional well, based on well type, price of gas and year of production the well is in. To many Pennsylvanians’ surprise, fee revenue was more than $204 million for the first year. Even compared with Pennsylvania’s $27 billion budget, that is significant revenue and is nearly equal to the annual state budget for the Department of Community and Economic Development.

The distribution formula is also complicated. Of the $204 million, the state took $23 million for various purposes, including administrative costs for the Department of Environmental Protection and Department of Transportation. Of the remaining $181 million, $109 million went directly to impacted municipalities, while $72 million will come back to counties indirectly as capital improvement projects from the Marcellus Legacy Fund. The Marcellus Legacy Fund includes money for bridges, water/sewer projects and environmental stewardship.

As the top producing county in Southwestern Pennsylvania, Washington County and its municipalities will receive more than 6 percent or $11.4 million of this year’s impact fees. Amwell, Chartiers, Hopewell and Mount Pleasant townships received a distribution of $500,000 or more. So the question is again, what should municipalities do with their money?

To answer this question, we need to examine the uses authorized by Act 13. The list includes everything from roads, bridges, water/sewage, to tax reductions, housing, social services or running the courts. While many would argue the uses of the revenue are broad, I would suggest the legislation allows local municipalities to be flexible in spending the fees and lets local officials truly respond to the needs of their own unique communities. But with flexibility also comes choices and it is probably tempting to use the money for new services, additional employees, cost offsets or even tax reductions.

To be on record, I am in favor of reducing taxes whenever possible. But while revenue from gas drilling will be generated for years, it will not be generated forever and, even more important for municipal budgeting, it will not be the same year to year. Therefore, our local municipalities should be cautious about incorporating impact money into their annual operating budgets.

I would suggest that local municipalities direct the money toward projects with lasting value and that increase business development, infrastructure improvements and tax revenues in their areas. Projects such as industrial park developments for new business expansions and water/sewage projects that increase opportunities for new housing and residents will have tremendous impacts on the long-term growth of our county, cities and townships.

The development of our county as a great place to work and live depends on having the infrastructure in place to provide for future growth. With the thoughtful use of this new revenue source by our local municipal leaders, our current gas boom can lay the foundation for Washington County’s growth long after the rigs have come down.

Jeff Kotula is president of the Washington County Chamber of Commerce.