The Pennsylvania Public Utility Commission announced that the annual distribution from impact fees collected for 2023 would be $179.6 million. That’s an approximate $100 million and 36% decrease from the previous-year distribution of $278.9 million. It’s the lowest distribution since 2020 and the third lowest since the imposition of the impact fee in 2011.
The change is mostly attributed to a significant decrease in the commodity price of natural gas. The amount each producer pays in impact fees is determined primarily by a multi-year fee schedule that is based on the average annual price of natural gas. A decrease in the average price of natural gas from $6.64/MMBtu in 2022 to $2.74/MMBtu in 2023 was the principal cause of the decrease in fees collected. This change in price led to producers paying 25-40% lower than they would have in the previous year. Drops in prices led to a decrease in not only fees, but also the development of new wells. These factors, along with the number of aging wells that pay less in impact fees, contributed to the massive decline seen in 2023.
The proceeds of the impact fees are distributed to the counties/municipalities where the gas wells are located, the state-maintained Marcellus Legacy Fund, and other state agencies. For 2023, $95.7 million will be distributed to local municipalities, $63.8 million to the Marcellus Legacy Fund, $10.5 million to state agencies, and $9.7 million to conservation districts/commissions.
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 the 2024-2025 fiscal year was passed on July 11, 2024 without the severance tax, but the debate will likely continue.
Sources
Pennsylvania natural gas impact fee collection drops from 2022 as prices, drilling fall – Pittsburgh Business Times
Act 13 Public Utility Commission
IFO – Releases
IFO – File Download
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