Natural Gas Impact Fees Through 2011 About Half of What a Drilling Tax Would Have Raised

September 11, 2012

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.

The Pennsylvania Budget and Policy Center calculated that a natural gas drilling tax modeled on West Virginia’s levy would have raised $387 million between July 2009 and December 2011, based on production data from the Department of Environmental Protection. More than $6 billion worth of natural gas was extracted from the state’s share of the Marcellus Shale during that time period.

“There are real questions about whether Pennsylvania’s fee is enough to pay for the impacts of drilling on local communities,” said Sharon Ward, director of the Pennsylvania Budget and Policy Center, in a press release. “Local communities have short- and long-term issues to address and should not be shortchanged.”

Because the 2011 drilling impact fee payment covered all Marcellus Shale wells drilled from 2006 through 2011, it is comparable to what a drilling tax would have raised through 2011, had one been enacted in mid-2009 when lawmakers first debated the issue.

In most energy-producing states, drilling tax revenue supports education and health care, funds environmental conservation and protection, and ensures that gas producers are paying for the impacts of drilling. Pennsylvania’s drilling impact fee, enacted into law in February, gives the commonwealth one of the lowest drilling tax or fee rates on gas extraction in the nation.