Impact Fee Payments Fall Due to Low Prices, Less Drilling

Counties and municipalities in Southwestern Pennsylvania and across the state will be looking carefully at their budgets as the state Public Utility Commission announced that this year’s impact fee distributions from the production of natural gas will be at their lowest level since the program’s inception.

Total impact fee payments for 2020 will total $146.2 million, 27 percent lower than the $200.3 million in 2019, and more than $100 million lower than 2018’s payment of $251.8 million.

Washington County will receive the most money of any county in the state, $4.475 million, and Greene County is fourth at $3.2 million, but that is well below what it usually received. Counties and municipalities affected by drilling will receive a total of $71.5 million this year, while $51 million will go to the Marcellus Legacy Fund, which provides money for infrastructure and environmental projects throughout the state. Another $23.7 million will go to state agencies.

This year’s lower distribution was the result of lower average natural gas prices in 2020 than in 2019, which caused a lower impact fee payment for each well in 2020 – along with the fewest number of new wells drilled than in any year since the passage of Act 13. The COVID-19 pandemic, which resulted in a sharp drop in demand, also contributed. The impact fee payments are distributed in July.

Impact fees are paid by natural gas producers as mandated under Act 13, which was passed by the state Legislature in 2012.

A recent report from the state Independent Fiscal Office (IFO) noted that this was the first year that collections from new wells, which pay higher fees, were not enough to offset lost collections from aging wells, which pay less.

The drop is not unexpected, as IFO in January issued a report forecasting a 28 percent drop in impact fee payments. Yet the reductions will certainly be felt by the counties and municipalities. Washington County and its municipalities in 2019 received $6.4 million, almost $2 million more than this year. Greene County and its municipalities will receive $1.4 million less this year. The impact fee has raised $2 billion over the last decade, the PUC noted.

Distributions for other Southwestern Pennsylvania counties include: Allegheny, $1.08 million; Beaver, $424,839; Butler, $1.47 million, and Westmoreland, $771,895.

The IFO report predicts that impact fee revenues will rise in 2021, although the amount will depend on the average annual price of natural gas and the number of new wells drilled.