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IFO Estimates Act 13 Drilling Fee Revenue Down In 2014 To $220.4 Million

The Independent Fiscal Office this week released an update on the Act 13 drilling impact fee revenue saying in 2014 the fee is estimated to generate $220.5 million, down slightly from $225.7 million in 2013. IFO said that equates to a 2.1 percent effective tax rate.

The effective tax rate, calculated by IFO, has been decreasing steadily since the fee was first imposed from an effective rate of 5.3 percent in 2011, 4.6 percent in 2012, 2.5 percent in 2013 to 2.1 percent in 2014.

The IFO noted 2014 was the first year in which horizontal stripper wells were eligible for an exemption from the fee after paying the fee for three years which resulted in an $8.7 million loss in revenue.

Due to the formula used to calculate the impact fee, the IFO cautiously estimated revenue from the fee in 2015 could drop by as much as $128.6 million-- $61.1 million from a drop in the number of new wells by 10 percent, $38.2 million because more wells will be operating in year four and five of their expected production life, and $29.3 million if the average price of natural gas is below $3.00 per MMBtu in 2014.

The market value of natural gas produced from unconventional (Shale) wells was valued at $10.5 trillion by IFO. In addition, the market value of natural gas liquids produced in Pennsylvania was $145.4 million.

The IFO drilling fee update is available online.

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