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 collected about $200 million in local impact fees on Marcellus Shale wells drilled through 2011, about half of what the commonwealth could have collected had a more robust natural gas drilling tax been in effect.
In new data from the Department of Environmental Protection, we can now see how much the state has really given away by refusing to put a robust gas extraction tax in place — and the sum is staggering.
Governor Tom Corbett’s administration has proposed giving $1.65 billion in state tax credits over 25 years to companies that build and operate an ethylene cracker plant in Pennsylvania. It would be a windfall for Shell Oil, which is evaluating a site for a cracker plant in Beaver County.
With the decision of the Bradford County Commissioners this week, all 27 counties with producing shale wells have agreed to assess a local impact fee. Another 16 counties with no Marcellus Shale wells have also adopted the fee. View a map of the counties adopting fees.
Legislation approved this week by the state Senate would assess an impact fee on Marcellus Shale drilling in Pennsylvania that is well below what gas drillers pay in extraction taxes in many other energy-rich states, such as Texas, Wyoming and Arkansas.