Higher natural gas prices boost state's drilling fee revenue
The state should pump nearly 11 percent more in fee money from gas companies this year, with more wells operating and higher natural gas prices triggering larger amounts that deep-shale drillers must pay.
Data released by the Public Utility Commission on Friday show the state expects to collect $224.5 million in 2014 through Act 13's impact fee assessed on unconventional wells, more than either of the two previous years.
The report inflamed the debate over how to tax plentiful gas from Pennsylvania shale, which likely will remain prominent this election year as Democrats use it to attack Gov. Tom Corbett.
There are 6,489 unconventional wells producing gas in the state, including 1,129 wells drilled in 2013 that pay a $50,000 fee that covers road work, conservation, housing and other costs in drilling areas.
While gas prices rose, the number of new wells drilled fell in 2013, from 1,288 in 2012.
In the oil and gas law known as Act 13, state lawmakers tied the fee to the price of gas.
“The number of new wells may be down, but keep in mind how the fee works,” said Patrick Henderson, Corbett's energy chief. “Wells from 2012 are paying for the second time, and those before that for a third time, so the overall universe of wells paying is up, which is good news for the commonwealth.”
The money is divided based on a formula in the law that first feeds set amounts to some state agencies. Most of the rest goes to municipal and county governments, largely based on where drilling is happening.
Opponents of the impact fee contend Pennsylvania is leaving money on the table. All four candidates for governor in the May 20 Democratic primary support some form of a severance tax based on the value or volume of gas and liquids from wells.
A report last month by the state Independent Fiscal Office said the impact fee translates to a very low tax rate when compared with nearby and large gas-producing states, placing Pennsylvania with Ohio at the bottom of 11 states.
“When you add it all up, one of the things the governor believes is conveniently overlooked is the cumulative tax burden in the state from the corporate income tax, the capital stock and franchise tax and other taxes that are applicable,” Henderson said.
The Marcellus Shale Coalition, which represents producers, said they have contributed more than $2.1 billion in recent years to the state's general fund, and more than $1 billion in infrastructure projects and royalty payments to the state and landowners.
But the Pennsylvania Budget and Policy Center has called on Pennsylvania and other states to adopt a common severance tax no lower than West Virginia's 5 percent rate. PBPC is a project of the left-leaning Keystone Research Center.
“For Pennsylvania residents, today's announcement is just a reminder that we are shortchanged by the failure of our elected leaders to enact an adequate severance tax,” said Sharon Ward, director of the center. The state's impact fee is “significantly lower” than what gas producers in the state pay elsewhere, she said.
“The only reason big oil companies avoid paying fair taxes in Pennsylvania — like they pay in every other natural gas state — is because Tom Corbett received about $1.7 million in campaign contributions from the gas and oil industry,” said Beth Melena, spokeswoman for the state Democratic Party.
The Corbett campaign responded by criticizing state Democrats for supporting a moratorium on hydraulic fracturing, or fracking, and said the governor's energy agenda has helped families, business and the economy. The Democratic State Committee passed a resolution in August calling for a moratorium until health and environmental concerns were addressed.
“The Pennsylvania Democratic Party supports a ban that would shut down Marcellus shale production in our state and kill thousands of family-sustaining jobs,” said Billy Pitman, spokesman for the Corbett campaign. “Gov. Corbett's pro-energy agenda is growing our economy, reducing energy costs for families and small businesses and putting Pennsylvanians back to work.”
State Rep. Brian Ellis, R-Butler County, the sponsor of Act 13, said such talk is “the familiar rhetoric of candidates who believe they can solve all problems by raising taxes.”
Areas of Western Pennsylvania in which natural gas development is happening are seeing growth and the benefits of impact fees that are returned to those areas, Ellis said. Advocates of a severance tax say, “We should be sending the money to Harrisburg, hoping that the areas where drilling is happening would see some of that money back,” he said. “I don't believe any of the statewide candidates are taking into account that we would be losing if we go to a statewide tax instead of a regional drilling tax.”
The state collected $202.5 million in 2013, based on production in the previous year, and $204.2 million in 2012.
The drilling impact fee was due from drillers by April 1, although some fees were delayed because of late and disputed payments, said PUC spokeswoman Jennifer Kocher.
PUC has until July 1 to send out that money, but how much each recipient gets should be known by June, she said.
The annual average natural gas price rose by nearly a third from 2012 to 2013, to $3.65 per thousand cubic fee from $2.78 per thousand cubic feet, according to the commission's calculations. The owners of newly drilled horizontal wells had to pay $50,000 for each. Owners of second-year wells paid $40,000, and owners of older wells paid $30,000 for each.
John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Few in Westmoreland County opposed to expansion plan for Mariner pipeline
- Rue21 plays to tough teen crowd with new store in Cranberry
- Western Pa. builders earn top honors for work
- Oilfield employee cutbacks may benefit long-haul trucking
- Wolf tax proposal puts Beaver County Shell plant at risk, gas group head says
- Refinery turbulence drives up pump prices
- Oil stocks drag on Dow, S&P 500; Nasdaq moves closer to record
- Rocket firm hired to probe deadly air bags
- Make me a match: Fidelity to match some IRA contributions
- Giant Eagle to close all 8 Good Cents locations
- Pittsburgh Business Ethics Awards honors outstanding efforts