Gas drilling impact fee in Pa. exceeds projections

Posted September 16, 2012

Associated Press

PITTSBURGH A new fee on gas drilling has generated millions of dollars more in revenue than first projected, but other major gas-producing states tax the industry at higher rates, according to an Associated Press analysis.

And the state still won’t be setting aside a share to track possible health impacts of drilling.

The state said this week it has collected almost $202 million of the roughly $206 million in impact fees that’s due from gas drilling companies. Projections this spring had been for about $180 million. A few drillers are disputing their bills.

Other states considered to be friendly to the oil and gas industry levy higher taxes on natural gas.

Texas imposes a 7.5 percent tax on the market value of gas produced, and West Virginia and Wyoming are at about 6 percent. Those states base taxes on actual production. Pennsylvania’s fee is mostly based on number of wells, and the 2011 revenue works out to about a 5 percent rate.

Pennsylvania’s 2011 production would have generated about $300 million at Texas’ rate, and $240 million at the rate in Wyoming and West Virginia, the AP found.

The disparity could rise in the near future, since production is still soaring in Pennsylvania, but producers won’t pay based on that. For example, at this year’s output drillers should sell between $6 billion and $7 billion in gas — enough to generate $360 million to $525 million of taxes in the other states.

According to an analysis from Republican state Sen. Gene Yaw, Pennsylvania’s revenues for 2012 are expected to rise by about $30 million. If that projection is accurate, next year’s total here will be about $235 million.

The legislation that created the impact fee also originally gave Pennsylvania health officials a share of the revenue, but representatives from Republican Gov. Tom Corbett’s office and the state Senate cut that to zero during final negotiations. The department still has some other funds to use, but not enough to create a registry of public health impacts, which had been a top priority.

Any amendment to the law will have to be voted on again by the full legislature, said Patrick Henderson, the state’s energy executive. He wouldn’t speculate on whether Corbett will ask for the health department funding to be restored.

It’s also not clear whether Secretary of Health Dr. Eli Avila will continue to seek a share of the funds. Health department spokeswoman Christine Cronkright did not respond to that question.

The state will take about $23 million off the top of this year’s $202 million. About $107 million will be split among 37 counties and some 1,500 municipalities hosting gas wells. The money can be used to fix roads, bridges and other infrastructure, provide affordable housing, preserve open space and buy equipment for first responders, among other expenses that have cropped up as gas industry workers have moved into towns in large numbers and strained available public resources.

The rest of the fee revenue will be split among state agencies dealing with drilling impacts.

Officials from two counties with heavy drilling activity had somewhat different plans for their portion of the money.

Washington County in Southwest Pennsylvania has not made a final decision, said director of administration Scott Fergus, but added the county has had “a lot of bridges that have had wear and tear because of the industry.” Fergus said the county supports the industry, but feels companies should pay their share of costs.

Bradford County commissioner Doug McLinko said he didn’t even support the fee because he feels the industry has done so much for the northeast Pennsylvania county.

“The first thing we’re going to do is to pay all of our county debt. Every taxpayer gets a tax decrease at that point,” McLinko said, adding that the county would likely then focus on infrastructure needs and job creation.

Jennifer Kocher, a spokeswoman for the Pennsylvania Utility Commission, said the panel hasn’t done projections for future years. That’s because the fee here is based partly on the wholesale price of gas, which can vary widely from year to year, and on the number of new wells that are drilled.

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