June 27, 2019
Pennsylvania’s impact fee on natural gas wells yielded its highest payout to date this year, the Public Utility Commission said on Thursday.
The annual fee levied on wells tapping the state’s gas-rich Marcellus and Utica shales raised $243 million for 2018, plus $8.9 million in back fees from companies that had withheld payments for several years while courts decided which low-producing “stripper” wells were exempt from the law.
The total — nearly $252 million — is well above the previous record total of $225.7 million for 2013.
The utility commission attributed the higher annual total to an increase in the number of wells paying the fee for 2018: 9,560 compared to 8,518 the previous year. It said the price of natural gas was largely stable over the year and did not affect the tally.
More wells were assessed fees because companies continue to drill new ones, with 779 unconventional wells installed last year, according to the Department of Environmental Protection. But a state Supreme Court decision last year also forced more older, low-flowing wells to pay the fee because they produced more than 90,000 cubic feet of natural gas per day in at least one month of the year.
Industry lawyers and a lower court had said they only had to pay the fee if they produced that much every month of a year.
The PUC said it took extra care to calculate how much counties and municipalities were owed in back fees from the disputed wells “because of the unique circumstances surrounding this issue and the potential financial impact on municipalities where the disputed wells were located.”
More than $5 million of the overdue fees will go directly to local governments and a housing program, while another $3.5 million will go to the Marcellus Legacy Fund, which pays for environmental, highway and sewer projects throughout the state.
Of the total amount collected for 2018, county and municipal governments that host shale wells will receive $135 million, the Marcellus Legacy Fund will get $90 million and $18 million will go to state agencies.
Payments are expected to be distributed in early July.
The impact fee is assessed per well to compensate state and local communities for the industry’s demands on public infrastructure and the environment. Natural gas prices and production volumes are secondary factors in calculating the fees, unlike the severance taxes that most gas-producing states implement.
The Robinson-based Marcellus Shale Coalition, which has lobbied hard against state severance tax proposals, said in a statement that Pennsylvania’s “unique” impact fee “continues to be a winning policy solution for the Commonwealth.”
The fee was implemented as part of a 2012 law. Since then, it has raised nearly $1.7 billion.
Gov. Tom Wolf is pushing to implement a variable severance tax on top of the impact fee to pay the debt on $4.5 billion he proposes to borrow for infrastructure projects over the next four years. The initiative, known as Restore Pennsylvania, is not likely to be a focus for the Legislature until at least the fall.