Revenue from Pennsylvania’s impact fee rose nearly 16 percent in 2018 as the state set a record for revenues collected from natural gas wells.
According to the Pennsylvania Public Utility Commission, the $242.9 million generated last year, up from $209.6 million in 2017, topped the previous high-water mark of $225.8 million set in 2013. The fee is collected on wells that extract natural gas through fracking, which uses the high-pressure injection of liquids into the ground to obtain the energy source.
In addition, the state Supreme Court ruled last year that certain low-yield wells, whose owners initially claimed they did not generate enough gas to trigger the impact fee, still had to pay. As a result, that ruling ended up generating an additional $8.9 million on top of last year’s tally.
Currently, the impact fee is divided into two funds, one for infrastructure maintenance and repairs that provides funding to state agencies and counties where wells are located and another that allocates money to all Pennsylvania counties for environmental projects.
The number of operational wells in 2018 totaled 9,560, an increase of more than 1,000 wells from 2017. Most of the wells are in the southwest and northeast corners of the state
In a relatively short period of time, Pennsylvania has become a key player in the American natural gas industry. According to Forbes, the state produces more than 18 billion cubic feet of natural gas daily, putting it behind only Texas among gas-producing states. Over the past decade, the state’s 32-fold increase in production means it now generates a fifth of all natural gas in the US.
“The recent increase in impact fee revenue, driven in large part by the rise in the number of unconventional wells, indicates there is growing demand for natural gas resources,” wrote the Allegheny Institute’s Hannah Bowser and Frank Gamrat this week in analyzing the impact fee data.
The increase also comes at a time when both the Wolf Administration and Republican legislators have differing ideas of how to capitalize on the natural gas boom, with neither side budging.
For years, Gov. Tom Wolf has touted a severance tax for natural gas, as the state is the only major natural gas producer without one. This year, Wolf tweaked the plan, separating it from his budget proposal. Called Restore Pennsylvania, Wolf wants the tax to pay for major infrastructure improvements, whether its bolstering high-speed Internet access or renovating dilapidated neighborhoods, in communities statewide.
The severance tax, which would be on top of the impact fee, would eventually be used to pay for bonds on the infrastructure improvement projects. Wolf has crisscrossed the commonwealth this year urging local communities to get behind the plan and lobby lawmakers for it.
Republicans fear the severance tax would be a job killer in a growing industry. Instead, two state senators have countered with a plan that would expand natural gas extraction by allowing producers to access deposits under state forests, areas Wolf has restricted for drilling. The impact fee from the additional gas would then go to fund Wolf’s projects.
In April, state Sens. Camera Bartolotta and Pat Stefano proposed letting companies drill horizontally in order not to impact the land above the deposits.
“We have an opportunity to fund all of the projects that Governor Wolf wants to complete without creating new taxes that will stifle investment, chase away new jobs and boost energy costs to consumers,” Bartolotta said when offering their proposal. “The natural gas industry already pays higher taxes in the form of impact fees that have helped fund billions of dollars in projects throughout the state. We need to explore different options other than piling on taxes that will ultimately be passed on to ratepayers.”