A report by Citizens for Pennsylvania's Future criticizing PA Senate Bill 1100 and PA House Bill 1950 which are comprehensive bills adding new rules and regulations for drilling in the Marcellus Shale. PennFuture says the legislation in the bills should be "unbundled" and considered separately.

1. Citizens for Pennsylvania’s Future
UNFINISHED BUSINESS:
The Pennsylvania Legislature and Marcellus Shale
Development
©2012 Citizens for Pennsylvania’s Future

2. Citizens for Pennsylvania’s Future
610 N. Third Street
Harrisburg, PA 17101
717-214-7920
www.pennfuture.org

3. Unfinished Business
Executive Summary
Shale gas drilling in the rich, productive Marcellus shale formation has been well underway in
Pennsylvania for four years. In 2011 the Department of Environmental Protection (DEP) issued 3281
permits to gas drillers in 36 counties.
Unfortunately, crucial public policies that would regulate and tax the gas drilling industry, protect our
state parks from gas drilling, prevent excess drilling in our state forests, and restructure the uses of
the Oil and Gas Lease Fund have stalled. Both Senate Bill 1100 and House Bill 1950 bundle together
crucial public policy questions that must be addressed separately. By combining consideration of
safety regulations, a drilling tax, restructuring the oil and gas lease fund and local government control
issues, legislative leaders force their members to accept the lowest common denominator on all these
issues in order to get to a deal. Neither of the bills addresses control of air pollution nor how to
protect our state parks or ensure wise use of royalty windfalls from gas development on state forest
land.
Under the Pennsylvania Constitution, the Commonwealth has the duty to ensure that its citizens have
access to “clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic
values of the environment.” Shale gas drilling presents unprecedented environmental challenges to
the Commonwealth. To carry out its obligations to all Pennsylvanians, the Corbett Administration and
the General Assembly must separately consider and take action to:
 Modernize its gas drilling regulations to provide adequate protection to streams, wetlands,
forests, and water supplies, and to control air pollution from drilling operations. DEP should
immediately begin modernizing many regulations under its current authority in the Oil and
Gas Act through its rulemaking process, and the General Assembly should immediately pass
legislation where needed;
 Enact a fair and reasonable drilling tax that raises substantial revenue to compensate local
governments for damage to local infrastructure and the provision of extra government services;
invests in environmental conservation and restoration programs; and ensures all
Pennsylvanians benefit from gas drilling;
 Enact new laws that prevent gas drilling in state parks and prevent further leasing of state
forest land; and
 Restructure the Oil and Gas Lease Fund to wisely invest its revenues in a legacy fund to ensure
the Commonwealth has the financial resources in the future for ongoing conservation of our
air, land, and water, especially for the state park and forest systems.

4. Create updated world-class regulations on drilling
Pennsylvania’s Oil and Gas Act has two main purposes: first, to permit the development of oil and gas
resources, and second, to protect the people, property and natural resources of the Commonwealth.
Today, the law is effective in serving only the first of these purposes: in 2011 alone, the DEP issued
5,548 permits for oil and gas wells. Meanwhile, many of the law’s protections of public health,
drinking water and environmental resources are antiquated and inadequate. The reason is simple:
written 27 years ago, the law was not designed to regulate high-volume horizontal hydraulic
fracturing and other aspects of gas operations to exploit “unconventional” formations like the
Marcellus Shale.
In December, both chambers of the General Assembly passed different bills that would improve the
Act’s environmental protections. (House and Senate negotiators are currently trying to resolve the
differences between these versions). Unfortunately, the improvements in this bill do not go far
enough. Among other things, the bill’s proposed amounts for reclamation bonds would remain too
low, the Department of Environmental Protection’s (DEP) power to waive setback restrictions too
broad, and well completion disclosure requirements too weak. Worse, the local ordinances section of
House Bill 1950 would strip municipalities of any real power to regulate the location of oil and gas
operations through land use ordinances. Such ordinances are municipalities’ most important tool in
protecting the health, safety, and welfare of their citizens and the environmental values secured by
Article I, Section 27 of the Pennsylvania Constitution.
We can do better. At a minimum, the local ordinances section of House Bill 1950 must be removed,
and the bill’s regulatory provisions strengthened. Additionally, because gas development poses
serious threats to air quality that the DEP has so far failed to take seriously, the General Assembly
should pass new legislation (such as House Bill 2113, recently introduced by Rep. Greg Vitali) that
strengthens regulation of air pollution from natural gas development sources. And, consistent with
the recommendations of the Governor’s Advisory Commission, the General Assembly should pass
new legislation requiring the Department of Health to monitor and assess the health impacts of gas
development activities.
Regardless of what happens in the legislature, the Pennsylvania Environmental Quality Board (EQB)
should act to improve the DEP’s regulation of Marcellus activities. A year ago, the EQB adopted new
regulations for the casing and cementing of gas wells. The EQB should adopt additional regulations
that (among other things) expand the list of public resources that the DEP must consider when
issuing well permits; require cradle-to-grave tracking of all gas well wastewaters; establish standards
and conditions for above-ground pipelines used to carry wastewater; and require “closed-loop” waste
management systems at well sites.

5. Enact a fair and reasonable drilling fee or tax
It’s been more than four years since deep natural gas drilling began here, yet Pennsylvania is still the
only major gas-producing state that does not impose a tax or fee on the extraction of its natural gas.
The impact fee proposals in both SB 1100 and HB 1950 fall woefully short of what Pennsylvania
taxpayers need and deserve.
Legislative inaction on a drilling tax has already hurt Pennsylvania taxpayers. If a reasonable,
competitive drilling tax had been in place since October of 2009, it would have already generated
almost $300 million in revenue. This is one tax that the public overwhelmingly supports – polls
consistently show about 70 percent want a drilling tax.
There are four elements that should be included in a drilling tax or impact fee to ensure that all
Pennsylvania citizens benefit from development of the Marcellus shale and other gas deposits.
First and foremost, it should raise revenue sufficient to offset the costs that drilling imposes across the
state.
Second, it should provide funding for the Environmental Stewardship Fund, which provides revenue
for Growing Greener. The Environmental Stewardship Fund gets its revenue from a $4.25 per ton
tipping fee charged to waste haulers at landfills, and was tightly structured by the General Assembly
during the Schweiker administration. It awards funding to local organizations which identify and
provide matching dollars – at least one dollar for every Environmental Stewardship Fund dollar.
But the Environmental Stewardship Fund is running out of money. Much of the tipping fee revenue is
now being diverted to pay off the debt on the Growing Greener II bond that was approved by the
voters in 2005. As planned, the bond money has also all been spent. The expiration of Growing
Greener II and the diversion of the Environmental Stewardship Fund to pay debt threaten to end
Growing Greener.
Third, a significant portion of the revenue from a drilling tax or impact fee must be returned to
communities dealing with the various costs of drilling, including damage to local infrastructure and
increased demand for public safety and other local government services.
Fourth, some of the revenue from gas drilling should be allocated to important educational and
community programs that benefit all Pennsylvanians.
Other gas-producing states like Texas, Louisiana, Alaska, Arkansas, Colorado, Wyoming, and West
Virginia have enacted common sense drilling taxes to benefit taxpayers in their states. Pennsylvanians
deserve no less.

6. Prevent Gas Drilling in State Parks
Pennsylvania’s 120 state parks are precious public treasures. They are integral to our quality of
life and the state’s economic well-being, returning $10 to local economies for every dollar of
state investment, generating over $818 million in local sales, and more than 10,500 jobs.
Sixty one of Pennsylvania’s 120 state parks lie atop the Marcellus formation. While the
Department of Conservation and Natural Resources (DCNR) doesn’t lease state park land for
gas exploration, the Commonwealth doesn’t own the mineral rights beneath about 80 percent
of state park land. Under Pennsylvania law, owners of those minerals have the right to develop
their property. While some minor gas and oil exploration has gone on in some parks over time,
the advent of Pennsylvania’s Marcellus gas boom have increased the value of those subsurface
rights, and make the threat of drilling in parks immediate – and widespread.
Drilling and associated development and heavy traffic will shatter the natural and esthetic
values of state parks. It will damage Pennsylvania’s quality of life, hurt local economies across
the state, and damage Pennsylvania’s tourism economy. It will compromise the best-managed
state park system in the nation, ruin the vision of Maurice Goddard, and tarnish Pennsylvania’s
legacy as the birthplace of conservation.
The gas industry – as good corporate citizens – has so far avoided drilling in state parks. They
should continue to do so, especially because horizontal drilling technology could allow mineral
rights beneath state parks to be accessed from outside their boundaries, without disturbing
them at all. Well pads can be sited outside park boundaries and still reach the privately-owned
mineral rights beneath them.
West Virginia – which owns a little more than half the gas rights under its state parks –
prohibits disturbing the surface of state parks for gas drilling. And New York State has recently
proposed such a prohibition. Pennsylvanians should do the same.
PennFuture is calling on drillers and pipeline companies to sign a pledge not to:
 Develop any deep gas reserves that would disturb the surface of any state park;
 Participate in the development of any pipeline that would carry gas from deep reserves
obtained by surface disturbance of any state park;
 Knowingly purchase or market gas from deep reserves that is obtained by surface
disturbance of any state park
PennFuture is also calling on the General Assembly to enact legislation to:
 Establish a 500 foot setback for drilling activity from the boundary of a state park and
protective study requirements for any proposed drilling activity that would effect a state
park; and
 Enact a significant impact fee if surface disturbance from drilling does occur in a state park.
This fee would be paid to DCNR to compensate for loss of enjoyment and damage to the
resource should any drilling occur within a state park.

7. Maintain the State Forest Leasing Moratorium
One-third of Pennsylvania’s state forest – 700,000 acres – is currently available for natural gas
drilling. Over the next two decades, under current leases, thousands of wells will be drilled
there, and thousands of miles of pipeline and industrial infrastructure will fragment the forest
and disrupt sensitive habitats and outdoor recreation opportunities. Public land managers are
already strained to the breaking point in overseeing this activity. Pennsylvania’s environment,
quality of life, and huge swaths of our state’s economy are all at grave risk if more state forest
land is leased for gas drilling.
In 2010, after a two year analysis, the Department of Conservation and Natural Resources
concluded that no additional leasing involving surface disturbance can occur without
significantly altering the ecological integrity and wild character of our state forest system.
Existing gas development activities on state forest land are already harming outdoor recreation
opportunities and our $33 billion tourism economy – the state’s second-largest industry. Forty
percent of the state forest in the Pennsylvania Wilds ecotourism region is already leased for gas
development. More leasing will deepen these problems.
More leasing would also have devastating economic consequences for our wood products
industry, which employs 90,000 Pennsylvanians – 10 percent of the state’s manufacturing
workforce – in 3,000 separate businesses, in every Pennsylvania county. The industry depends
upon the state forest’s certification as sustainably-managed by the Forest Stewardship Council.
It provides a market advantage for companies that buy timber harvested from the state forest
to produce certified wood products for the rapidly growing green market. The state forest
comprises fully 88 percent of the certified-sustainable forest in the Commonwealth. This
certification is at risk if there is additional large scale leasing of the state forest for natural gas
development.
The existing moratorium on state forest leasing was put in place in October, 2010 after the
House of Representatives passed House Bill 2235 by a 157-33 margin, which would have
established a three-year moratorium on leasing, but the Senate failed to act.
According to two recent statewide polls, 72 percent of Pennsylvanians oppose any further
leasing of state forest land, and 57 percent oppose ANY drilling in state forest at all.
Natural gas prices have fallen below $3 for 1,000 cubic feet, the lowest price in a decade. From
a purely fiscal standpoint, having another state forest lease sale now would ensure that the
state gets a poor return.
For all of these reasons, the state forest leasing moratorium should not be lifted or altered.

8. Invest State Forest Gas Royalties Wisely In a Conservation Trust Fund
Pennsylvania’s history of oil, timber, and coal extraction left in its wake severe, persistent, and
costly environmental consequences. Today, at the dawn of the shale gas era in Pennsylvania, we
have an opportunity to learn from the past and to take a different, historic course.
Our State Park and Forest systems benefit Pennsylvania’s economy, as well as our environment,
public health, and quality of life. DCNR’s sustainable timber harvests support the state’s forest
products industry and its 90,000 employees. State parks return almost $10 to local economies for
every state dollar invested and support almost 11,000 local jobs. The public lands and the outdoor
recreation they provide contribute heavily to our $33 billion tourism economy.
Pennsylvania must maintain these lands or they will inevitably degrade, and the benefits they
provide to all of us will be lost. DCNR’s Oil and Gas Lease Fund (OGLF) was created in 1955 to do
just that – support conservation, recreation, and flood control projects from revenue generated
from resource development on state-owned land. Over $160 million was deposited in OGLF from
1955-2008 and used for conservation purposes. Eight state parks and portions of over 30 others
were purchased and developed with OGLF money. However, since 2008, $383 million raised
from leasing state forest land for shale gas development has been transferred from OGLF to the
general fund. Most of the remaining OGLF income has been used by DCNR to partially offset deep
general fund budget cuts. This systematic disinvestment in the public lands threatens their very
existence. If current trends continue, Pennsylvania will spend hundreds of millions of dollars of
Marcellus royalty income for operations and have nothing to show for it when the gas runs out
except decimated public lands and a deep budgetary hole.
The royalty income from state forest land – without leasing one more acre– affords Pennsylvania
the means and the opportunity to stop the degradation of the public lands, preserve DCNR’s
ability to manage the public lands, and make sure that we are able to do our Constitutional duty of
conserving these lands for future generations. We can do all of this – AND invest in
environmental improvements that will grow our economy – by taking a conservative approach
and investing – rather than spending – the bulk of state forest royalties, obtaining benefits that
will continue to flow to all Pennsylvanians long after the flow of gas has ceased.
At least 80 percent of royalty income from the state forest should be prudently invested for three
purposes:
 To supplement DCNR’s operating budget while rebuilding the agency’s General Fund budget,
and to restore investment in the state park and forest systems;
 To fund a pay-as-you go renewal of Growing Greener;
 To create a Conservation Trust Fund that can be built over time to a point, when royalty
income subsides, where annual interest income (without touching the principal) would
provide sustainable funding for conservation of the state park and forest systems and to
support conservation investments throughout the state.
Pennsylvania has a once-in-a-lifetime opportunity to create a lasting conservation legacy. We
must not squander it.