How Much Revenue will NE PA Counties Get from Impact Fee?

Pennsylvania’s northeastern counties stand to bring in millions of new revenue this year under the impact fee that Gov. Corbett is soon due to sign. Once the legislation is signed, county governments will have 60 days to decide whether or not to adopt an ordinance adopting the new fee structure, along with the restrictions it imposes on a county’s ability to regulate drilling via zoning (see this MDN story). Each county is allowed to keep 60 percent of the total impact fee collected. The other 40 percent? That goes to the state. The 40 percent is the “spread the wealth around” compromise lawmakers needed to strike in order to pass the legislation.

Here’s a rundown on how much in new revenue northeastern PA counties stand to collect in direct fees, the 60 percent portion:

• Luzerne – $51,000;
• Wyoming – $2.3 million;
• Susquehanna – $11 million;
• Lackawanna – $0;
• Wayne – $0.

Wells drilled vertically only for exploratory purposes that have not been hydraulically fractured and don’t produce gas are not eligible for the impact fee (which is why Lackawanna and Wayne will get zippo). However, the new legislation assumes wells drilled horizontally are not exploratory. So even if a well is drilled horizontally and does not end up producing, the driller is still liable to pay part of the impact fee for three years. After three years the fee is suspended for wells producing less than 90,000 cubic fee per day of gas.

That means Luzerne County’s two test wells, both of which are horizontal, will be subject to the $50,000 per well fee if the county adopts it, despite the fact that both were plugged after they showed little prospect of producing economic amounts of gas.

Luzerne County will consider adopting the fee ordinance even if it stands to raise little from it, interim County Manager Thomas A. Pribula said.

"All counties are basically revenue starved," he said, "so if we have the ability to generate additional revenues it would be wise to do something."

The county and its municipalities will share about $51,000 of the $100,000 raised from the two wells – after the state’s share and distributions to other programs, like the Department of Environmental Protection, natural gas vehicle incentives and low-income housing support, are taken out.

In Wyoming County, where gas drilling has increased rapidly in the last year, commissioners are just beginning to review the impact fee bill, chief clerk William Gaylord said.

"There are a lot of questions to be answered," he said. He did not indicate if the commissioners are inclined to adopt the fee ordinance.

"This has been talked about for years," he said, "and they have never come out for or against it."

If Wyoming County adopts the fee, its wells could raise $4.5 million this year. The county and its municipalities would share about $2.3 million of it, according to calculations based on state spud data.

Local and county governments in Susquehanna County, which ranks among the top gas producers in the state, are eligible for about $11 million of the $20.3 million its wells will raise this year if the county passes the ordinance.*

Lackawanna County has two vertical exploratory wells, and Wayne County has eight vertical exploratory wells. Neither of those counties would be eligible to collect direct (60 percent) impact fees from those wells. However, they may get a slice of the 40 percent of money from impact fees collected in other counties that goes to the state.

It is not entirely clear whether counties with "spud" wells [wells started to be drilled, but not completed for whatever reason] that cannot be levied a fee, like Lackawanna and Wayne, will be allowed to share the money collected from the impact fee statewide.*

State officials recommend counties with any kind of unconventional (or horizontal) drilling pass an ordinance allowing for the fee to make themselves eligible to receive at least a portion of the state-collected fee.

*The Scranton Times Tribune (Feb 13, 2012) – NEPA counties to raise millions or nothing under gas impact fee