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.
A review of statements by representatives of shale drilling firms and their allies makes the motivation for this exaggeration clear — to preclude, or at least to minimize, taxation, regulation, and even careful examination of shale drilling.
Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim, according to a new report released today by the Multi-State Shale Research Collaborative, a group of research organizations tracking the impacts of shale drilling.
Last week, the Pennsylvania Public Utility Commission reported that natural gas drillers are paying $202 million in local impact fees this year, but a new report finds a moderate tax on gas production could bring in twice as much as the fee does in the short term and generate more than $1 billion annually by the end of the decade.
As the economic value of natural gas production increases in Pennsylvania’s Marcellus Shale, the local impact fee created by Act 13 of 2012 is failing to keep pace. By 2019-20, a 4% natural gas severance tax could generate three times as much as the fee is estimated to bring in.
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.