Projections from the Independent Fiscal Office indicate that Pennsylvania’s annual revenue from the impact fee on natural gas drilling will be nearly 50 percent higher this year.
With the average natural gas price higher than anticipated, impact fees have increased as well, the IFO said. The agency expects about $243.9 million in impact fees, an increase of 48 percent over the $164.6 million collected for 2024. IFO said the fees are the highest they’ve been since 2022 when impact fees reached $278.9 million. The projections are even higher than previously anticipated in a report issued late last year.
Pennsylvania’s impact fee funds state agencies like the Department of Environmental Protection that help regulate the industry, as well as counties and municipalities with natural gas wells located in them.
Counties and municipalities will receive $134 million, but how much individual counties get as part of the distribution will not be released until July. Additionally, the Marcellus Legacy Fund will get $89.4 million. State agencies will receive around $1.05 million, and local conservation districts will get around $10 million.
The IFO said the impact fee is determined due to a bracketed schedule based on the number of years a well becomes subject to the fee, the type of well, and the price of natural gas. For 2025, the Public Utility Commission reported impact fee revenues of $243.9 million, an increase of $79.3 million over the previous year. The fees are collected from the more than 12,500 wells across the state.
Part of the increase was due to higher fees in the schedule. The average annual price of natural gas on the New York Mercantile Exchange was $3.34, an increase of $1.16 from the prior year. That increase triggered a statutory inflation adjustment. Those two adjustments cause the fee levels for wells operating year four or greater to increase by between 30 percent and 116 percent depending on the operating year.
Additionally, IFO said, there were 442 new wells subject to the fee for 2025, an increase of 138 new wells over the prior year. New wells are subject to the highest fee and help offset the impact of aging wells subject to lower fees, the agency said.
According to a press release from IFO, the Effective Tax Rate (ETR) was 1.6 percent, a decrease of 1.1 percentage points from the prior year. Still the average fee per well rose substantially to $19,504 for 2025, up from $13,560 in 2024.