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Pennsylvania launches natural gas drilling fee

Source: Thomson Reuters Foundation - Mon, 3 Oct 2011 18:33 GMT
Author: Reuters
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* New well fee could reap ${esc.dollar}120 million in first year

* Stricter drilling limits proposed away from water sites

* Fines for civil violations would double

Oct 3 (Reuters) - Pennsylvania on Monday announced plans for new levies and stricter rules for natural gas drilling, which has been blamed for contaminating local water supplies.

Governor Tom Corbett proposes to slap a potential ${esc.dollar}160,000 "impact fee" on each well drilled, which would be used to improve infrastructure and promote the use of natural gas vehicles in the state.

"Estimates show that this impact fee will bring in about ${esc.dollar}120 million in the first year, climbing to nearly ${esc.dollar}200 million within six years," Corbett said in a statement.

Each well will be subject to a fee of up to ${esc.dollar}40,000 in the first year, ${esc.dollar}30,000 in the second year, ${esc.dollar}20,000 in the third year and ${esc.dollar}10,000 in the fourth through tenth years, the statement said.

Pennsylvania is at the center of a U.S. natural gas drilling boom, thanks to a drilling technique called hydraulic fracturing, or fracking, which releases gas in shale rock by blasting deposits with chemical-laced water and sand.

Pennsylvania is home to a large portion of the Marcellus shale, the country's largest deposit of shale gas.

But the contamination of local water supplies by drilling fluids in Pennsylvania has led to calls for stricter regulations. In neighboring New York state, fracking has been banned while its effects are considered.

The proposals were were put forward by the Marcellus Shale Advisory Commission, which was formed by Corbett in March. Under the recommendations, the distance of drilling sites from private water wells will increase from 200 feet (60 meters) to 500 feet (150 meters) and to 1000 feet (300 meters) from public water systems.

The required distance from streams, rivers and ponds will increase to 300 feet (90 meters) from a current 100 feet (30 meters).

The penalty for civil violations, such as spills or contaminating water supplies, will double to ${esc.dollar}50,000.

Revenues from greater fines and well fees will be used in part to fund a construction of natural gas refueling stations and natural gas vehicle fleets for mass transit systems. (Reporting by Edward McAllister; Editing by Andrea Evans)

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