Natural Gas Impact Fee Revenue Falls 28 Percent

Counties and municipalities across Pennsylvania will see lower natural gas impact fee payments in 2021, the state Independent Fiscal Office recently reported.

A report earlier this month from the IFO calculated that the expected total impact fee is expected to be $144.85 million for 2020, a drop of 28 percent from 2019 and and down a whopping 42 percent since 2018. The impact fee was created by Act 13, which was approved by the state Legislature in 2012. The amount is the lowest since the impact fee was instituted, with the previous low at $173.25 million in 2016, according to state Public Utility Commission figures.

The amount distributed to counties and municipalities is expected to be $75.87 million, down about 29 percent from $109.18 million in 2019. The impact fee on unconventional gas wells is determined according to a schedule that includes the age of the well and the price of natural gas.

The IFO report calculated that the main reason for the drop in revenue was lower natural gas prices, as an oversupply had depressed prices even before the COVID-19 pandemic began in March, which caused a huge drop in demand. The average annual price on the New York Mercantile Exchange was $2.08 per MMBtu. Because the price dropped below $2.25, the impact fee schedule decreased by $5,000 per horizontal well compared to 2019, for a loss of $52.1 million. Reduced collections from aging wells also led to a $3.8 million reduction.

Washington County receives the most impact fee money of any of the state’s 67 counties due to the amount of drilling activity and Greene County is number four, so the reduction will certainly be felt as the money is distributed. In 2019, Washington County and its municipalities received about $6.62 million and Greene received $4.67 million. The counties and municipalities will have to take these declines into consideration when planning their budgets for upcoming years.