Report: 21% drop expected in 2020 natural gas impact fee

A state agency is predicting a 21% drop in natural gas impact fee revenue in 2020, largely because of falling natural gas prices.

The Pennsylvania Independent Fiscal Office estimates that impact fee collections will total $198.2 million this year — down from $251.8 million last year. The 2019 fee must be paid by natural gas producers by April 1 and will be disbursed by the Pennsylvania Public Utility Commission in July.

The impact fee is the annual fee that the state applies to each new unconventional (i.e. horizontal) well drilled into the Marcellus shale. Some of the money is distributed directly to counties to offset the costs of increased drilling activity. Some is made available to individual communities through grants.

The impact fee is highest in a well’s first operating year and can range from $60,000 in the well’s first year to $5,000 in the well’s 15th year, according to the Marcellus Shale Coalition.

The IFO said the primary reason for the expected 21% drop was natural gas prices which dipped below the $3 trigger in the law (Act 13 of 2012), causing a $5,000 per-well decrease in the impact fee. The average annual price of natural gas on the New York Mercantile Exchange for 2019 was $2.63 per million British thermal units, according to IFO.

Per Act 13’s provisions, impact fee revenue is distributed according to four broad categories: state oversight agencies; counties and municipalities directly affected by well drilling activity; all 67 counties for conservation, recreation and bridge repairs; and statewide environmental grant programs, such as the Marcellus Legacy Fund.