Colin McNickle: Can Pa.’s record impact fee receipts be sustained? | TribLIVE.com
Featured Commentary

Colin McNickle: Can Pa.’s record impact fee receipts be sustained?

Colin McNickle
1485737_web1_WEB-fracking-wellpad
A drilling rig towers over the walls of Huntley & Huntley Energy Exploration’s Poseidon well pad in Penn Township.

Pennsylvania collected the highest total impact fees ever in 2018, fueled in part by a court ruling but paced largely by increased demand for shale gas, concludes a review of state data by the Allegheny Institute for Public Policy.

Act 13 of 2012 (with collections retroactive to 2011) instituted the impact fee, a tax by any other name, on unconventional gas wells, namely those drilled via hydraulic fracturing, better known as fracking. The average annual trading price of natural gas determines the tax, with the fee declining as the wells age and production falls.

The money is distributed to counties, in part, based on the number of wells hosted; it is to be spent on 13 designated impacted categories (though questions have abounded for years about the appropriateness of some of that spending).

But counties without shale gas wells also share in the spoils (the money earmarked for environmental matters with no required accounting), as do a potpourri of state agencies.

The impact fee generated just under $243 million last year, the highest amount since the fee was instituted. The previous highest collection came in 2013, with just under $226 million. Collections for 2018 topped 2017’s fees ($209.55 million) by nearly 16%.

Data from the Pennsylvania Public Utility Commission (PUC) credits last year’s $33.4 million growth to a 12.23% increase in the number of operating wells — up by 1,042 for a total well count of 9,560 — and a 3.37% increase in spot prices. (That said, the number of wells for which ground was broken dropped by 4.07%.)

An additional $8.86 million was generated with the Pennsylvania Supreme Court’s resolution of a lawsuit that challenged how impact fees on “stripper wells” were assessed. The court sided with the PUC; that boosted total 2018 impact fee collections to $251.83 million.

“Even without the additional money arising from the court decision, 2018’s impact fee collection produced the largest distribution to date and caused total impact fee revenue collected since 2011 to surge to almost $1.7 billion,” say Hannah Bowser, a research assistant at the Pittsburgh think tank, and Frank Gamrat, the executive director.

According to PUC data, there were 2,974 wells in the seven-county Pittsburgh Metropolitan Statistical Area (MSA), accounting for about $18.5 billion of total impact fee disbursements in 2018.

Washington County paced not merely the MSA but the state with 1,165 non-conventional shale gas wells, garnering $8.43 million. Allegheny County, with just 130 operating wells, received $1.97 million.

Armstrong County, with 112 shale gas wells, received $1.50 million; Beaver County’s 113 wells generated nearly $727,000; Butler County was paid $3.11 million for its 500 wells; Fayette County’s 224 wells led to a $1.24 million payment while 240 wells in Westmoreland County resulted in a 2018 allocation of $1.56 million.

“Bear in mind that the impact fee was created as a tax on natural gas producers who drill unconventional wells,” the researchers say. “Due to the demanding nature of the extracting method, the impact fee revenue was designed in part to ‘reimburse’ local areas for the wear and tear on infrastructure.”

But while the 2018 data indicated a growing demand for natural gas resources, 2019 could be a different story, what with national forecasts of reduced drilling fueled by falling prices and reconstituted efforts by the Wolf administration to impose a severance tax on top of the impact fee in Pennsylvania.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy and can be reached via email.

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.