Pennsylvania expects higher drilling impact fees in 2014

Pennsylvania expects to collect impact fees totaling $224.5 million this year from companies that have drilled unconventional horizontal shale gas wells, according to an announcement Friday by Gov. Tom Corbett’s office.

The revenue total is primarily from fees assessed on 47 drilling companies for Marcellus and Utica Shale gas wells drilled in 2013, plus much smaller fees on previously drilled unconventional gas wells assessed under provisions of the state’s oil and natural gas law, Act 13. It also includes $645,000 collected on “discrepancies” from past impact fees.

The 2013 total surpasses impact fee collections of $204.3 million for 2012 and $204.2 million for 2011.

More than half of the impact fee revenue is distributed by the state Public Utility Commission to municipalities and counties where natural gas drilling is taking place, and can be used for environmental, public safety, road and bridge repairs and emergency services. Those distributions will be determined by the PUC and announced at the end of May or in early June, said Patrick Henderson, the governor’s deputy chief of staff and energy executive.

PG graphic: Impact fee payments
(Click image for larger version)

Impact fee money is also distributed to county conservation districts and a number of state agencies, including the PUC, Department of Environmental Protection, fire commissioner’s office and Fish and Boat Commission, for use in drilling oversight programs and activities.

Receiving impact fee money for the first time this year is the recently established Marcellus Legacy Fund, which is administered by the Commonwealth Financing Authority, and funds watershed restoration, abandoned mine reclamation, open space, greenway, trail and recreation projects, flood control and water and sewer construction.

Mr. Henderson said that each year the impact fee totals have exceeded expectations. He said budget estimates predicted revenue of $180 million from impact fees for 2011, the first year it was assessed.

“Given that it was $204 million last year, we expected $210 million this year. To get $224 million was a pleasant surprise,” Mr. Henderson said. “The question is whether this year’s increase is sustainable and the new norm.”

He said he would like to see impact fee revenues continue to rise and believes they will.

Mr. Corbett said in a statement that the impact fee revenue has provided an economic boost to the state while helping to protect human health and the environment.

“We are building a stronger Pennsylvania by harnessing our abundant resources to create jobs for working families, reinvest in our local communities, and protect our environment for generations to come,” Mr. Corbett said. “Through Act 13, we are protecting public health and safety, safeguarding our environment, and making sure our world-class energy industry grows in a responsible way.”

Although the Associated Petroleum Industries of Pennsylvania, a division of the American Petroleum Institute, characterized the revenue stream from Pennsylvania’s impact fee as “huge,” a number of state lawmakers, all four of the Democratic gubernatorial candidates and the Pennsylvania Budget and Policy Center have said that replacing the impact fee with a severance tax on the amount of natural gas produced would bring the state millions of dollars in additional revenue.

“Pennsylvania’s natural gas companies have something to celebrate today, a natural gas impact fee that is significantly lower than what they pay in other gas-producing states,” Sharon Ward, president of the policy center, said Friday. “For Pennsylvania residents, today’s announcement is just a reminder that we are shortchanged by the failure of our elected leaders to enact an adequate severance tax.”

The policy center released a report in August that said replacing Pennsylvania’s impact fee with a 4 percent severance tax, which is less than West Virginia’s 5 percent tax, could generate $1.2 billion annually by 2019-20, five times that of the state’s impact fee.

The Marcellus Shale Coalition, an industry lobbying organization, issued a news release Friday touting the drilling industry’s job and economic benefits to the state and its residents in the billions of dollars and warned against “unnecessarily making Pennsylvania a less attractive place to create jobs.”

According to the National Association of State Legislatures, of the 32 states that produce natural gas, only Pennsylvania, Maryland and New York do not have a severance tax.

Don Hopey: or 412-263-1983.

First Published April 4, 2014 12:40 PM

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