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AP: Shale Gas Impact Fee Misses Billions in Potential Revenue

REUTERS/Tim Shaffer /Landov

A worker prepares to join two pieces of drill pipe on a natural gas drilling rig near Towanda.

The Associated Press has resurrected the debate over whether Pennsylvania’s year-old Act 13 impact fee is causing the state to miss out on billions of dollars in revenue, which could be brought in through a tax.
The AP says its review comes to the same conclusion as an analysis by the Pennsylvania Budget and Policy Center, a progressive research group based in Harrisburg:

Pennsylvania’s effective tax rate on gas production could drop to as low as 1.3 percent over the next few years.
The AP found that at the current pace production could grow to about 4 trillion cubic feet in 2015. That’s the equivalent of $16 billion in company revenue if wholesale prices are at $4, which is the current range. At West Virginia’s 5 percent tax rate, that would generate about $800 million.
But the policy center estimates that the Pennsylvania impact fee will generate $237 million to $261 million in 2015, depending on the number of wells drilled and prices.

Act 13 places a fee on each gas well drilled. It generated $204 million in 2011 and $198 million in 2012, which represents a three percent drop. That’s because the fees are tied to the wholesale price of natural gas, which dropped by a third between those years.
The AP notes that both the gas industry and the Corbett administration take issue with the analysis:

Those aren’t fair comparisons, said Kathryn Klaber, the president of the Marcellus Shale Coalition, an industry group. She noted that many other states give drillers a tax exemption for the first few years of production to allow companies to recoup costs.

Governor Corbett’s Energy Executive Patrick Henderson also told the AP that gas companies have also paid approximately $1.7 billion in corporate taxes since 2007.
StateImpact Pennsylvania explained the tax vs. impact fee debate in 2011:

Pennsylvania is the only major energy-producing state that doesn’t assess a tax or fee to natural gas extraction. In 2009 and 2010, Democrats tried, failed, tried again, and failed again, to pass a tax into law.
Then, Republicans took control of the House and governor’s office. Corbett made it clear he’d veto any tax that reached his desk. In an April speech, he called the idea of taxing an industry simply because it was successful  “un-American.”


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