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Report: Tax Revenue Up In Pennsylvania's Drilling Counties

Scott Detrow / StateImpact Pennsylvania

Jim Cawley talks about Pennsylvania's new drilling impact fee in Hershey

When Lieutenant Governor Jim Cawley spoke about natural gas drilling at the Pennsylvania State Association of Township Supervisors’ annual conference this morning, he had the air of a televangelist.
“You see, Marcellus Shale is a game-changer for our commonwealth,” he told the crowd. “Not just in the gas-producing area, but all across the commonwealth.”
Addressing people who don’t live in drilling-heavy portions of the state, Cawley said, “They don’t see the revitalization of Main Street. They don’t see the neighbor, the brother, the aunt, the friend, who’s been unemployed for two and three and four years, finally having a family-sustaining wage.”
“But yet, Marcellus Shale is important to all of us,” Cawley continued, pointing out that, despite the lack of a severance tax on natural gas drillers, drilling companies have paid $1.6 billion in taxes since 2006.
Cawley’s economic revitalization argument may be bolstered by a new report from Penn State University, which shows people are both making and spending more money in drilling-heavy counties.

The report finds sales tax revenues have increased by an average of 24 percent since 2007, in counties hosting at least 10 Marcellus Shale wells. Here’s an overview of the new study, from the PSU website:

The report suggests that significant effects are seen in state sales tax collections, which reflect the level of retail activity in a county. The data indicate sales tax collections in counties with significant Marcellus development continued to outperform collections in counties with less or no Marcellus activity.
“For example, sales tax collections in counties with 150 or more Marcellus wells drilled between 2007 and 2011 rose an average of nearly 24 percent during those years, compared to an average decrease of about 5 percent in counties with no Marcellus activity,” [Agricultural economics professor Timothy] Kelsey said. “Sales tax collections dropped in only three of the 23 counties with more than 10 Marcellus wells, compared to decreases in 22 of the 32 counties with no Marcellus Shale drilling.”
The increases were particularly dramatic in Bradford County (50.8 percent), Greene County (31.4 percent) and Susquehanna County (27.4 percent), three of the top six counties in the number of Marcellus gas wells. “The data support anecdotes we hear about Marcellus development increasing local retail activity,” he said.

The report also found the average total taxable income in drilling counties increased by 6.3 percent during the same period. “The average rise in income in high-activity Marcellus counties was fueled by increases in salaries and wages (3.3 percent); rights, royalties and patents (441.5 percent), which reflects gas lease and royalty payments; and net profits (1.4 percent),” the summary says.
In a statement, Marcellus Shale Coalition president Kathryn Klaber said, “This considerable uptick in sales tax revenue in key natural gas producing counties across the Commonwealth is a clear indication of our industry’s economic contribution, particularly as it relates to supply chain and small business growth. While these figures will certainly ebb and flow over time, this new analysis is yet another proof point that responsible natural gas development continues to have an overwhelmingly positive impact in communities where production is underway as well as for every Pennsylvanian.”
It’s important to note the data doesn’t mean local governments are suddenly rolling in revenue – as the study points out, “the data reflect tax collections by the state government within each county; county governments cannot levy these taxes, so the changes should not be viewed as affecting local tax collections. Previous studies on Marcellus Shale development and local government and school district finances have found very mixed or slight tax impacts.”
Penn State gathered this information from the state Department of Revenue, and checked it against the Department of Environmental Protection’s drilling database.
Read the full report here:

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