The Oil and Gas Addendum

Pennsylvania Senate Bill 102 Revives Unconventional Gas Well Fee Prohibitions

Pennsylvania Senate Bill 1346 which was introduced at the end of the 2023-2024 legislative session. Its aim was to restrict the distribution of unconventional gas well fees to municipalities whose zoning ordinances “unreasonably” prohibited or limited unconventional gas well development. Although that draft legislation never made it out of committee before the last legislative session ended, it has been revived in the 2025-2026 legislative session.

On January 23, 2025, Senate Bill 102 of 2025 was introduced and referred to committee. As its sponsor Memorandum states, this draft legislation is a reintroduction of Senate Bill 1346. The purpose of Senate Bill 102 is to restrict the distribution of unconventional gas well fees to municipalities that prohibit or unreasonably limit unconventional gas well development. In our December 11, 2024 post No Funding For You?,we discussed many of the concerning aspects of Senate Bill 1346. Those concerns remain, particularly because there is a substantial difference between a zoning ordinance that outright prohibits unconventional gas well development and a zoning ordinance that provides for unconventional gas well development in certain areas of the municipality.

The focus here is one particularly problematic aspect of Senate Bill 102 - its proposed statutory subsection 58 Pa.C.S. § 2314(d.2). This proposed statutory subsection states that:

Restricted account.--Upon notice to the commission that a party has initiated litigation challenging the validity of a zoning or other ordinance that the party alleges is in violation of Chapter 32 or that unreasonably limits or prohibits future development of unconventional natural gas wells, the commission shall place any revenue otherwise due to a municipality under subsection (d)(2) or (3) into a restricted account maintained by the commission. No revenue shall be distributed to the municipality until the conclusion of the litigation.

So, if the Pennsylvania Public Utility Commission receives notice that a municipal zoning ordinance is being challenged in court because the ordinance prohibits or unreasonably limits unconventional gas wells, the Public Utility Commission must withhold unconventional impact fee distributions to that municipality. No discretion is involved. That money, which the Public Utility Commission must place into a “restricted account”, may only be distributed to the municipality after the litigation ends. This part of Senate Bill 102 will likely have a chilling effect on municipal zoning activities that impact unconventional oil and gas development and could negatively impact residents, including oil and gas owners that the draft legislation seems intended to help.

Unconventional gas well fees can be used to fund a variety of municipal services. 58 Pa.C.S. 2314(g). Many municipalities rely on the unconventional gas well fees to help provide those public services. If those funds are withheld from municipalities, then those services could be in jeopardy, or municipalities could have to fund those services through other means, which could potentially involve raising taxes.

It is important to recognize that Senate Bill 102 mandates that the Public Utilities Commission withhold these funds if a challenge to an ordinance is filed. This is not just a scenario where a court has determined that a zoning ordinance prohibits or unreasonably limits unconventional gas well development. Municipalities would be deprived of this funding simply because their ordinance is challenged. That litigation, inclusive of appeals, could result in municipalities being without access to unconventional gas well fees for several budget periods. Because unconventional gas well fee distributions could be suspended at any time, municipalities may find it difficult to budget for services that are eligible for funding by those unconventional gas well fees.

This part of Senate Bill 102 would likely have a chilling effect on municipalities in their zoning decisions related to unconventional gas well development. The draft legislation does not provide any clear guidance about what it means for a zoning ordinance to “unreasonably” limit unconventional gas well development. Since there is no definition of the prohibited conduct, municipalities may err on the side of caution and avoid zoning ordinance provisions that could be interpreted to “unreasonably” limit unconventional gas well development. But, that does not necessarily mean that municipalities could guarantee their uninterrupted access to unconventional gas well fees.

Municipalities that enact a municipal zoning ordinance that is very accommodating to unconventional gas well development could be subject to suspension of unconventional gas well fees. That is because under Senate Bill 102, the Public Utilities Commission must suspend unconventional gas well fee distributions upon notice of any challenge to a municipal zoning ordinance that contends that the ordinance prohibits or unreasonably limits unconventional gas well development. Unless a municipality imposes no limits on unconventional oil and gas development, it is conceivable that some individual or entity may contend that the ordinance is too limiting. That seems to place many municipalities in “no win” situations - even municipalities that authorize unconventional oil and gas development in many locations.

Senate Bill 102 of 2025, like its predecessor Senate Bill 1346 of 2024, is designed to create a simple scheme to keep municipalities from prohibiting or unreasonably limiting unconventional gas well development. But, whether a zoning ordinance actually prohibits or unreasonably limits unconventional gas well development is not necessarily a straightforward question. And, this draft legislation may have unintended consequences for municipalities and for oil and gas owners who may see diminished municipal services or higher local taxes if unconventional gas well fee distributions are suspended. It remains to be seen how Senate Bill 102 is re-framed as it passes through the legislative process.

If you have questions about this content, contact Oil and Gas and Zoning Attorney Brendan A. O’Donnell at odonnellba@hh-law.com or 412-288-2226.