Natural Gas Impact Fees Set New Record in 2022

Pennsylvania has set a new record for the amount of impact fees paid by natural gas producers, with the 2022 amount jumping 19 percent from the previous year to reach $278.8 million. The previous record was set in 2018, when $251.8 million was collected from natural gas drillers. The state Public Utility Commission this week announced details of the distribution of 2022 impact fee money. County and municipal governments affected by drilling will receive a total of $157.3 million, and an additional $103.6 million will go the Marcellus Legacy Fund, which is used for environmental projects across the state. The all-time high comes just two years after total impact fees hit a record low in 2020 due to the COVID-19 pandemic, when just $146.2 million was available. They rebounded strongly in 2021, climbing back to $234 million. “This year’s distribution is over $44 million higher than last year, driven primarily by the average price of natural gas in 2022 ($6.64 per MMBtu) versus the average price in 2021 ($3.84 per MMBtu) which generated a higher impact fee for each well in 2022 – along with the addition of 574 new wells during 2022,” the PUC press release states. The Act 13 impact fee was instituted in 2013 after the surge in unconventional drilling in the Marcellus and Utica plays in the state and is based on a formula that takes in the average annual price of natural gas and the age of the well, with new wells being taxed at a higher rate than aging wells. The $6 gas price level is the upper limit at which wells can be taxed. Payments to counties and municipalities are based on the amount of drilling there. Washington County, which is located in the heart of the Marcellus region, again holds the top spot for impact fee revenue and will receive $9,079,132 followed by Susquehanna County in northeastern Pennsylvania at $8.96 million, Bradford County with $7.1 million, and Greene County with $6.5 million. Those amounts are well above what the counties received last year. Counties and municipalities can use these funds for infrastructure and capital projects and public safety. Auburn Township in Susquehanna County took over the top spot among municipalities receiving the most money with $1.46 million, while Center Township in Greene County fell to second place, at $1.38 million. Amwell Township in Washington County will receive $1.17 million in impact fees. The top producer payments were from EQT at $42.38 million, followed by Chesapeake Appalachia at $39 million, and Range Resources at $33.7 million. Recent history has shown how the distributions can swing up or down each year, and those fluctuations should be calculated into municipal budget expectations.