Higher natural gas prices will provide a significant boost to Pennsylvania's shale gas impact fee collections this year, according to projections from the state Independent Fiscal Office. Payments by shale gas companies are expected to be $46 million more than last year, when impact fee revenues hit a record low.
The estimated total collection, $219.4 million, is on the high end of a range of projections the office released in July and closer to the fee's peak years in 2013 and 2014. Payments are due in April.
Natural gas prices averaged more than $3 per million British thermal units on the New York Mercantile Exchange in 2017, which bumped up the amount companies have to pay for each eligible well by $5,000 under the law's fee schedule. More than 800 new wells also helped offset declining revenues from old wells that pay less as they age, although that factor only contributed about $2.7 million to the total increase, the office said. About 8,600 Marcellus and Utica shale wells are subject to the fee, and about 2,300 are exempt because they have been plugged or produce too little gas to qualify, the office reported. Its estimate of exempt wells has not been adjusted to reflect a lawsuit, currently before the state Supreme Court, challenging the Pennsylvania Public Utility Commission's interpretation of what counts as a low-producing "stripper" well, which could cut the total fee revenue by millions of dollars.
The increase means there will be more money to share among the communities that host shale gas wells, which split the bulk of the funds. Proceeds from the fees are also allocated to state environmental, infrastructure, emergency management and housing programs. Higher gas prices also mean the impact fee will impose a lower average tax burden on the companies that pay it this year. The fiscal office estimated the annual average effective tax rate will be 2.9 percent, based on the fee amount, gas prices and production volumes. Last year, the effective tax rate was 4.5 percent.