Impact fees paid by gas drillers in Pa. in 2023 drop by more than $100 million

• By Unnati Akhouri

Pennsylvania collected about $180 million in impact fees from natural gas companies in 2023 – one of the lowest amounts paid since the fee started. 

The fee collected is over $100 million less than the previous year, a 36% reduction. It’s the lowest amount on record except for $173 million in 2016 and $146 million in 2020.

The Public Utility Commission (PUC), which collects and distributes the fee, said that the lower average price of natural gas and the drilling of fewer wells in 2023 are responsible for the drop.

The funds collected will be distributed to local government, state agencies and the Marcellus Legacy Fund. 

Municipalities and counties get the largest share – about 60% of the collected fees. This year, that amount is $96 million – a $60 million drop from last year. The local governing bodies can use the money for construction, infrastructure repair, environment restoration, and even tax reductions. 

Washington County is getting the largest portion of the funds, close to $5.5 million, followed by Susquehanna County and then Bradford County, which will receive $5.4 million and $4.3 million, respectively. Auburn Township in Susquehanna County is receiving $882,438 – the biggest share among townships. 

The PUC says the amount of money distributed is based on the amount of drilling activity in the area. 

The Marcellus Legacy Fund is getting about $64 million to support projects like roadways repair, waterways cleanup, and rehabilitation of greenways. 

The remaining funds will go to state agencies like the Department of Environmental Protection and the Fish and Boat Commission, PUC said.

 

Established in 2012, impact fees require gas drillers in Pennsylvania to pay an annual fee for unconventional gas wells that they drill or operate. 

The fee is based on the number of wells owned by a company, the age of the wells and the average price of natural gas that year. In 2023, average price of natural gas was marked at $2.74 per MMBtu (Metric Million British thermal unit) compared to the average price of $6.64 per MMBtu in 2022.  

The Marcellus Shale Coalition, which represents oil and gas drillers in the area, called the cumulative impact fee of $2.7 billion in the past 12 years, “a boost for Pa.”  

“By every measure, natural gas benefits all Pennsylvanians, state agencies and services provided by counties, townships and boroughs across the Commonwealth,” MSC’s president David Callahan said in a news release. He touted the recent analyses that say Pa. gas consumers saved $1.85 billion due the drop in gas prices, and increased use of gas has improved the air quality.

Both the analyses were done by MSC. 

Natural gas emits less CO2 and other pollutants associated with coal. Over the years, coal  plants have shut down as natural gas has come up as the cleaner alternative.

However, natural gas is responsible for one-third of the nation’s methane emissions – a greenhouse gas 28 times more potent than CO2 at trapping heat. 

Environmental activists say that avoiding the worst impacts of climate change will require transitioning away from all fossil fuels, including natural gas. 

Pennsylvania’s Independent Fiscal Office (IFO) said the impact fee does not consider the volume of gas produced by the company and, therefore, does not reflect the tax burden relative to the gas sold. 

In a report, IFO said that the fees paid would correspond to an effective tax rate of 2.5%.

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