Issue Spotlight: Pennsylvania's Natural Gas Impact Fee
In 2012, Pennsylvania enacted an “impact fee” on natural gas wells drilled into Pennsylvania’s Marcellus Shale that generates a relatively small amount of revenue from the expanding gas industry. PBPC estimates that, using a “moderate” production scenario, Pennsylvania's impact fee will bring in less revenue than a severance tax comparable to that of Texas or West Virginia. As production increases over time, the gap grows larger between the revenue generated at the West Virginia or Texas tax rates and from Pennsylvania’s impact fee.
"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," said PBPC Director Sharon Ward. "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 replacement of Pennsylvania natural gas impact fee with a 5% severance tax is unlikely to deter firms from drilling new wells in the state, and it will certainly not inhibit the continued operation of existing wells.
Ohio, Pennsylvania, and West Virginia should take a common approach to taxing gas and oil drilling in the Marcellus and Utica Shale, leaders of research and policy organizations from each state said today.