PUC distributes over $146 million in impact fees from gas drilling

Pennsylvania’s public coffers just got a natural gas-powered boost.

The Pennsylvania Public Utility Commission on Monday announced that $146.3 million in impact fees will be distributed in 2021. This year’s distribution pushes the total revenue from impact fees to over $2 billion since Act 13 was enacted in 2012.

Pennsylvania’s version of a severance tax, impact fees are collected from unconventional natural gas operators and distributed primarily to local governments where development occurs.

Funds from impact fees are used to fund conservation projects, infrastructure improvements, emergency response efforts and other public programs.

“The impact fee not only funds critical projects here locally but also a wide variety of important environmental projects in communities throughout the state,” said Sen. Gene Yaw (R-23), who serves as Chair of the Senate Environmental Resources and Energy Committee. “The natural gas industry has been a great partner in creating new jobs and opportunities in our communities, and this week’s announcement is another reminder of the importance of this industry in Pennsylvania.”

The 2021 impact fee distribution represents fees collected for the 2020 reporting year.

This year’s top five receiving counties are Washington County ($4,475,826), Susquehanna County ($4,048,393), Bradford County ($3,396,291), Greene County ($3,215,463) and Lycoming County ($2,336,241).

The top five paying producers this year are EQT Production Company ($25,253,200), Range Resources Appalachia LLC ($17,610,800), Chesapeake Appalachia LLC ($14,112,200), Cabot Oil & Gas Corporation ($13,723,800) and Seneca Resources Corporation ($12,122,300).

“Combining the billions in impact tax revenue with the billions in other business taxes and investments made by the industry, natural gas development is providing tremendous benefits to communities across the state, even in areas without drilling activity, and boosting our economy,” said American Petroleum Institute Pennsylvania Executive Director Stephanie Catarino Wissman.

All 67 Pennsylvania counties will receive a combined total of $20.4 million in impact fees to support bridge and park projects, according to the Marcellus Shale Coalition. Local governments directly impacted by shale gas development will receive $76.5 million, the bulk of the distribution.

“While our industry was certainly impacted by the economic effects of the pandemic, this tax further demonstrates how all Pennsylvania communities and families share in the many benefits of responsible natural gas development,” Marcellus Shale Coalition President David Callahan said.

Impact fee collections for 2020 dropped to a record low, down $54.1 million from last year.

According to the Independent Fiscal Office, the primary reason for the decrease was the low average annual price of natural gas on the New York Mercantile Exchange, which is based on the Henry Hub. “The price declined to $2.08 for CY 2020, the lowest annual average since the fee’s inception, causing a fee schedule reduction and a $52.6 million decrease in revenues,” the IFO said.

A mild 2020 winter and the COVID-19 pandemic also decreased demand for natural gas, according to the IFO.

Aging wells also were a factor.

“This was the first year in which collections from new wells were not enough to fully offset lost collections from aging wells,” the IFO said.

The IFO projects a much brighter impact fee outlook for the 2021 reporting year.

“The CY 2021 monthly average price through June is $2.76, a 50.6% increase from the same period in 2019. Bentek Energy projects that the average annual NYMEX price will be $3.07 from July to December,” the IFO said.

If projections hold, the average annual NYMEX price will be $2.91 and the fee schedule will revert to the 2019 higher level, according to the IFO.

“Pennsylvania’s natural gas tax continues to deliver important benefits for the entire Commonwealth,” Callahan said.