Marcellus Shale Drilling and Impact Fees Skyrocket Upward

Marcellus Shale impact fees are headed upward as drilling activity in the region accelerates; bringing good news to all Pennsylvanians who benefit from them.

Pennsylvania, in early 2012, enacted the most sweeping rework of oil and gas laws in the state .... Called Act 13, one of the provisions of the law is an “impact fee” collected on each horizontal shale well drilled. The fee is intended to offset the impacts of drilling in places where drilling happens, hence the name. However, in order to get enough support to pass Act 13, politics were played and 40% of the “fee” got re-allocated to non-impact uses. That is to say 40% of the fee became a tax and it’s now skyrocketing upward along with drilling activity.

Pennsylvania’s impact “fee” is, in reality, the equivalent of a severance tax.

The main difference is that the fee is calculated according to a sliding schedule based on how long a well has been around. Beginning with the first year a shale well is drilled, and every year thereafter, drillers pay a set fee, regardless of how much gas is produced. If a driller drills a well but doesn’t complete it in year one, that driller still pays the same (very steep) fee, regardless of no production.

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