Demanding More Dollars From Drillers

Pennsylvania’s new drilling impact fee has not deterred special interests from demanding more money from the state’s most prolific producers of new energy.

Act 13 of 2012 imposed fees on natural gas wells that are based on the value of the natural gas produced. The fee for the first year of a horizontal gas well ranges from $40,000-$60,000, depending on the price of gas. The state expects to collect $400 million in just the first two years of this fee.

The price of natural gas has steadily declined over the past two years due to an abundance of supply—saving Pennsylvanians hundreds on their energy bills. Now those who depend on big government are suggesting the state should base the fee on the volume of gas produced rather than on its price to get even “more” tax revenue.

John Hanger, a Democratic candidate for governor, went even further, calling the impact fee “a huge subsidy to the gas industry.” A fee is now a subsidy? How Orwellian!

Claims that Pennsylvania collects less money from producers than other states are missing the big picture. Patrick Henderson, Gov. Corbett’s Energy Executive, says the critique ignores more than $1.7 billion in state taxes paid by oil and gas operators since 2007. Plus, the commonwealth’s taxation begins in a well’s first year while other states exempt taxes for the initial few years, says Kathryn Klaber, president of the Marcellus Shale Coalition.

It may be fair to expect an industry to compensate for its negative impacts on local infrastructure, such as damaged roads; however, even the current impact fee goes beyond that by sending money to counties that have no gas wells.

Changing the law to maximize tax revenue would create chaos for companies doing business in the state, and would run the risk of driving the businesses themselves to other, more business-friendly gas-producing states. Despite the claims of critics, gas drilling has created tens of thousands of jobs, and provided billions to Pennsylvania residents in royalty and lease payments.

But the groups that depend on taxpayer funding as part of their business model aren’t satisfied with the benefits for Pennsylvania families, they just want more for themselves.