The PA Independent Fiscal Office is projecting natural gas impact fee collections of $239.9 million for 2025. This is up 46% from 2024.
The Pennsylvania Impact Fee is an annual charge that is imposed on unconventional natural gas wells drilled and operated within the state. The fee is levied for the first 15 years of each well’s life and is based on the age of the well and the average price of natural gas the previous year. Payment for the Impact Fee is due on April 1 each year, which the state then distributes to local communities and various state agencies.
Collections of the fee have exceeded $2 billion since the fee was enacted in 2012. Annual collections have fluctuated in recent years due to varying prices of natural gas and the volume of drilling activity within the state. Recent years’ collections have been as follows:
| 2020 | $146.3M |
| 2021 | $234.4M |
| 2022 | $278.9M |
| 2023 | $179.6M |
| 2024 | $164.6M |
| 2025 (projected) | $239.9M |
Pennsylvania’s Impact Fee differs from the severance taxes imposed by many neighboring states. A severance tax is tied directly to production of the resource and is calculated based on the volume or value of natural resources extracted from the ground. As extraction or mining activity increases, severance tax liability rises accordingly. By contrast, Pennsylvania’s Impact Fee is assessed as a flat, per-well charge each year and does not fluctuate based on production levels.
Neighboring states rely on traditional severance taxes with varying rates. Ohio imposes a severance tax of 2.5 cents per thousand cubic feet (mcf) of natural gas produced, while West Virginia assesses a severance tax equal to 2.5% or 5% of gross receipts, based on the well’s production. These differences highlight Pennsylvania’s unique approach to taxing natural gas production and underscore how tax obligations can vary significantly depending on the state in which drilling occurs.
For more information on this subject, please contact a member of Schneider Downs’ Energy & Resources industry group.
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