IFO Predicts PA Impact Fees for 2017 Will Soar, Near Record High

Since 2012, Pennsylvania has collected the equivalent of a severance tax from Marcellus Shale drillers via something called an impact fee. Same concept as a severance tax. You drill a well, gas comes out, you pay a tax. Except with an impact fee you pay whether or not anything comes out of the ground, meaning an impact fee is superior to a severance tax, which is based on how much comes out of the ground. The impact fee quickly started to generate hundreds of millions of dollars a year in extra revenue for Pennsylvania–60% of which goes back to the communities where drilling happens (which Philadelphia politicians hate), and 40% of which goes to the black hole of Harrisburg for redistribution (which Philadelphia politicians love). Drilling began to slow in 2014, and crashed in 2015/2016, with low low commodity prices for natgas. The impact fee doled out this year is based on revenues raised last year, in 2016, during the worst part of the downturn. So it’s no surprise that impact fees collected and distributed this year, in 2017 have been the lowest since the impact fee began (see PA PUC Impact Fee Report: Revenue Down Again in 2016). The PA Independent Fiscal Office (IFO) does a pretty good job of guesstimating how much impact fee revenue will get generated in the coming year, based on activity this year. The IFO just released an impact fee update (full copy below) with an outlook for 2017. The IFO predicts next year’s impact fee will generate around $222 million in revenue, which is very close to the highest amount generated thus far. Wow! What a swing in the pendulum–from lowest to near highest in one year…

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