Pa. shale gas impact fee likely to increase in 2018: report

The amount of money collected under Pennsylvania’s drilling impact fee this year was the lowest in the program’s history, but projections for next year are much brighter.

According to a recent report from the state Independent Fiscal Office, the impact fee for next year could increase by as little as $8.7 million, or as much as $49 million.

The state in April collected $173.3 million in impact fees from shale gas drillers, the lowest amount in the program’s six-year history, Kallanish Energy learns.

The program, which imposes a fee on the number of shale wells and the volume of natural gas production from those wells, has collected $1.2 billion since its inception in 2011.

The anticipated increase in the impact fee is being attributed to two factors, according to the Independent Fiscal Office.

One is an 118% increase in the number of new shale wells drilled so far this year compared to last. Data from the state Department of Environmental Protection show 398 new horizontal wells were drilled from January to June this year, the Beaver County Times newspaper reported.

Since wells in their first year of operation pay the highest level of impact fees, the Independent Fiscal Office expects this uptick in wells could result in an $8.7 million increase in the impact fee.

However, a much larger increase could occur, depending on the price of gas on the New York Mercantile Exchange (NYMEX).

As currently implemented, the impact fee assessed on each Pennsylvania shale well is calculated using a complex formula that factors in the price of natural gas. If the price of natural gas reaches $3 per million British Thermal Units (MMBtu), the impact fee rate will increase by $5,000 per well.

The Independent Fiscal Office said the price of natural gas has averaged $3.22/MMBtu so far this year, and that rate isn’t expected to dip below $3.

If the new rate kicks in next year, it could add roughly $49 million to the fund.