The Pennsylvania Public Utility Commission (PUC) recently published detailed information regarding the 2017 distribution of Act 13 impact fees levied on unconventional natural gas wells.
Act 13 was signed into law by former Pennsylvania Governor Tom Corbett in 2012. The act imposes an impact fee on unconventional natural gas wells in the Commonwealth. Unconventional gas wells are those drilled in the production of natural gas from a geological shale formation (such as Marcellus Shale). Impact fees are determined considering the age of the well and the average price of natural gas (as determined by the PA PUC each January). Unconventional wells are subject to an impact fee for at least 15 years. Act 13 restricts the use of impact fees to certain approved uses. Most funds collected are distributed to counties and municipalities where shale gas development is occurring, while some funds are available to be distributed to local governments across the Commonwealth and to address statewide issues.
The PUC distributed over $209 million in impact fees during 2017, the third-highest amount since the impact fee has existed. Higher natural gas prices and an increase in producing wells generated impact fee distributions that were $36 million higher in 2017 than in 2016. Local governments primarily used 2017 impact fee funds for public infrastructure projects, emergency preparedness/public safety expenditures, and to replenish their capital reserve funds. Statewide conservation programs and the Pennsylvania Department of Environmental Protection also received significant impact fee distributions.
In addition to the impact fee, Pennsylvania lawmakers have debated for years about levying a severance tax on natural gas producers. While the impact fee is imposed on each unconventional natural gas well drilled, a severance tax would assess natural gas producers on the resources they extract. The Pennsylvania state budget for fiscal year 2019 was passed on June 22, 2018 without the severance tax, but the debate will likely continue.