Impact fee changes for drilling troubling
For many years, the drilling industry has pushed back against the commonwealth placing a severance tax on natural gas production, citing the Act 13 impact fees that return money to the communities most impacted by drilling.
The argument against a severance tax, the industry claims, is that it would be double taxation and drive them to other states. Moreover, all tax money would be diverted to Harrisburg or Philadelphia and away from the local communities that need it the most.
Gov. Tom Wolf is once against proposing a severance tax as part of his budget, but it’s dead-on-arrival in the state Legislature.
But a ruling last month by the Commonwealth Court is muddying the waters a bit. The court ruled 5-2 that some low-producing “stripper wells” are not subject to Act 13 impact fee payments. The court decided wells producing less than 90,000 cubic-feet of natural gas per day in “any calendar month” are not subject to the fees.
While that might not impact the larger operations in our region, it does leave some open-ended interpretation. Some are concerned the language of the ruling will allow operators to suppress well production to avoid paying impact fees for the entire year.
In response, state Rep. Pam Snyder is introducing legislation that clarifies who has to pay the impact fees on unconventional wells.
She said the Commonwealth Court’s ruling could “put the impact fees in disarray” and she estimates it will cause communities to lose $16 million in impact fee money. A state Public Utility Commission analysis projects that as many as 2,400 active wells could revert to “stripper well” status and would not be required to pay a fee, based on the court’s ruling.
Her legislation, introduced last week, would amend Act 13 to require payments of impact fees on any well that produces at least 90,000 cf per day in any month of the year.
It’s an important change that guarantees moderate-producing wells will pay their fair share. This should be an easy fix.
If the current ruling is permitted to stand as is, it might jeopardize the entire impact fee, which could force legislators to seriously reconsider implementing the dreaded “S” word the industry loathes so much. That wouldn’t be good for anyone.