PA IFO Says 2017 Impact Fee Revenue 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 (a more reliable source of tax revenue than a severance tax). 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. As the price went down, so too did the number of new wells drilled. Impact fee revenue (which is delayed a year) also went down. The impact fee doled out this year is based on revenues raised in 2017. The PA Independent Fiscal Office (IFO) does a pretty good job of guesstimating how much impact fee revenue will be generated. Last July, the IFO predicted impact fee revenue from 2017 would end up being around $222 million in revenue (see IFO Predicts PA Impact Fees for 2017 Will Soar, Near Record High). Now that the year is in the can and production reports are rolling in, the IFO now predicts impact fee revenue will end up at $219.3 million. The all-time high for a single year’s impact fee revenue was 2013, when it was $225.7 million. Looks like 2017 will come within a whisker of that record. Meaning higher levels of new drilling is now “back” in the PA Marcellus…

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