Experts predict the fee revenue used to offset the impact of drilling activity may continue to decline


The State of Pennsylvania benefits greatly from the impact fee revenues paid by Marcellus Shale drillers. However, experts are predicting that fee may decline considerably, according to a recent report by a state research office.

The Independent Fiscal Office (IFO) projects that impact fee revenue collected during 2015 could be anywhere from $15 million to nearly $34 million less than the $223 million collected in 2014.

They attribute the decline in revenue, in part, to lower natural gas prices and fewer new wells being drilled. In addition, some older wells with declining production are becoming exempt from the fee.

Related: 4 Reasons You Should Expand into the Marcellus Shale

The impact fee affects drillers in Pennsylvania, who do not pay severance tax on the gas they produce in the state. That’s due to Act 13 of 2012, which mandates they pay an annual fee based on the number of unconventional wellheads drilled and the wholesale prices of natural gas. An article in the Wyoming County Press Examiner noted that Pennsylvania is the nation’s second-largest natural gas producer, but the only major fossil-fuel-producing state that does not levy a severance tax on natural gas production.

The purpose of the fee is to offset the cost of impacts of drilling activity, not to be a revenue generator. And Republican Senator Gene Yaw, the Senate’s environmental committee chairman, told the media that local officials in drilling regions have been careful to not become overly dependent on the monies from the impact fees.

According to the U.S. Energy Information Administration, the state receives less than 1 percent of its state collections from the impact fee. However, the impact fee revenue goes to support a wide range of projects that minimize the impact of drilling activities in Northeast Pennsylvania and other Marcellus regions. But even other regions of the state, with no drilling in the area, benefit from Act 13 funds.

Related: New Interest in Upper Devonian Shale Spurs Oil & Gas Exploration

One county commissioner told the Senate Environmental Resources and Energy Committee that the loss of Act 13 funding would mean “deteriorating conditions throughout the county with roads, bridges, infrastructure, lost jobs and large tax increases throughout.”

Other impact fee revenue goes to support the Marcellus Legacy Fund, state agencies, a state housing fund and county conservation districts.

Erica Wright, a spokesperson for the Marcellus Shale Coalition said, “Pennsylvania’s impact tax continues to work as designed, generating millions in revenue for every county across the Commonwealth. These tax revenues are essential to county and local government budgets, helping to stabilize and even lower taxes for Pennsylvania families.

Related: Do You Have a Risk Management Plan?

“The impact tax has raised more than $850 million revenues since 2012, which are overwhelmingly directed to local governments rather than Harrisburg. This common sense tax structure empowers and enables local governments to make important infrastructure and other vital community improvement projects.”

Commenting on the reports that revenues may drop, she added. “While drilling activity levels will inherently ebb and flow over time, we cannot lose sight of the fact that local communities will lose out immensely under higher energy tax plans being considered in Harrisburg, as the Pennsylvania State Association of Township Supervisors have made clear.”

According to the IFO, the impact fee took in $204 million retroactively in 2011; $202 million in 2012, when the law was enacted and $225.7 million in 2013.

Subscribe: Save the trees for beavers, sign up for our E-Newsletter!

Related Stories

Like this story? Sign up for alerts!