This lean year for Pennsylvania’s shale gas impact fee collections likely won’t be followed by another, according to new projections from the state’s Independent Fiscal Office.
Impact fee revenue is expected to rise by between $8.7 million and $49 million next year, from the record-low $173.3 million that the state collected in April. More new wells and higher natural gas prices are expected to drive the increase.
If the average annual price of gas on the New York Mercantile Exchange rises above $3 per million British thermal units for 2017, as analysts expect, companies will pay $5,000 more per well compared to this year, the IFO said. That would push the total collection for the year to $222.3 million, much closer to the top revenue years for the 5-year-old program.
If the average annual price does not rise, more new wells are still expected to prompt a moderate increase in the total collection to $182 million.
Companies drilling for gas in the Marcellus and other shale formations pay the highest impact fee when they drill a new well and pay lower amounts in subsequent years for up to 15 years. Impact fees are assessed after each calendar year and the payments are due to the state every April.
Pennsylvania’s impact fee is structured differently than the severance taxes more commonly collected in other natural gas-producing states. Much of the impact fee revenue is sent to communities that host shale gas wells, with funds also allocated to state environmental, infrastructure, emergency management and housing programs.
The effective tax rate for the two scenarios presented by the IFO range from 1.9 percent to 2.3 percent, based on projections for the total impact fee revenue, the regional price of gas and the volume of gas produced in 2017. The effective tax rate for this year’s collection was 4.5 percent.
The fiscal office’s projections do not account for the potential impact of a recent Commonwealth Court case that changed the threshold for when low-producing “stripper” natural gas wells are exempt from the impact fee. The Pennsylvania Public Utility Commission has said this year’s impact fee collection would have been $16 million lower if the ruling had been in effect. The commission has filed an appeal with the state Supreme Court.
Laura Legere: email@example.com.
First Published July 21, 2017 11:14 AM