Impact Fee Distribution Amounts Bounce Back Big

After hitting an all-time low last year due to pandemic economic factors, Pennsylvania impact fee payments on natural gas production bounced back strongly this year, reaching more than $234 million. “This year’s distribution is near $100 million higher than last year, driven primarily by the average price of natural gas in 2021 ($3.84 per MMBtu) versus the average price in 2020 ($2.08 per MMBtu) which generated a higher impact fee payment for each well in 2021 – along with the addition of 518 new wells during 2021,” the state Public Utility Commission said in a press release announcing the July distributions, which are based on 2021 natural gas production. The $234.43 million is the second-highest amount in the program’s history. Natural gas producers pay impact fees based on a formula that includes the natural gas price and number of wells that was included in Act 13, which governs unconventional gas wells and was approved by the legislature in 2012. County and municipal governments directly affected by drilling will receive a total of $123,217,163 for 2021, while $86,030,934 will be transferred to the Marcellus Legacy Fund, which provides financial support for environmental and infrastructure projects, and $25,189,477 will be distributed to state agencies. Washington County again holds the top spot for impact fee revenue and will receive $7,656,281, followed by Susquehanna County at $7.24 million, Bradford County with $5.87 million, and Greene County with $5.44 million. Those amounts are well above what the counties received last year, when Washington got $4.475 million and Greene received $3.2 million, and will help bolster county capital funds. Center Township in Greene County continues to receive the most money of any municipality, at $1.265 million for 2021. Amwell Township in Washington County will receive just shy of $1 million, and Franklin Township, Greene County, will receive $934,000.

Counties reported putting most of that revenue into capital reserve funds for future projects, with a much smaller percentage going to public safety and infrastructure projects, among other items. Municipalities, on the other hand, spent a large portion of their distributions on infrastructure projects, followed by holding some in capital reserve funds, and spending on public safety. Washington County has the most producing unconventional wells in the state with 1,934. Greene County has 1,544. EQT Corp., the largest natural gas producer in the country and the state, paid the most in impact fees, at $39 million, followed by Range Resources at $29.65 million. The Pennsylvania Independent Fiscal Office recently released a report indicating that impact fee revenue is likely to increase next year based on both the big rise in natural gas prices and an increase in the number of wells being drilled this year. Under one scenario, if average natural gas prices are above $6 per MMBtu, an additional $24.3 million would be collected, making 2023 distributions the largest ever in the program’s history. Under another scenario with slightly lower prices, an additional $10.8 million would be collected. While the swings in impact fee revenue have historically not been as large as they were between 2020 and 2021, the fee does vary based on price and production, so counties and communities should be mindful of the fluctuations when developing their budgets to estimate the totals conservatively.