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Independent Fiscal Office Estimates Act 13 Drilling Impact Fee Revenue Of $163.8 Million In 2024, Down $115 From 2022

On December 9, the Independent Fiscal Office issued a report estimating the Act 13 drilling impact fee for calendar year 2024 will generate $163.8 million, a decrease of $115.1 million from its 2022 record of $278.9 million.

In 2023, fee revenue was $179.6 million, down $99.3 million from 2022, which means the fee lost $214.4 million in revenue from its peak over the last two years.

County and municipal funding from the impact fee in 2024 will drop by over 44% to $86.2 million from $155.5 million in 2022, as a result of this decline in revenue.

Visit the PUC’s Act 13 Impact Fee webpage to see how fee revenue was distributed in prior years.

The Act 13 drilling fee is a per well fee. It is not based on natural gas production which has remained fairly steady the last few years during the shale industry pullback. Read more here.

The IFO said the decline in collections is largely due to a significant decrease in new wells that pay the highest fee and help offset reduced collections from older wells.

The IFO estimates that 320 wells will be drilled in calendar year 2024, a decrease of 103 wells (-25%) from the prior year and the lowest number since calendar year 2007.

Click Here to read the entire report.

Municipalities Should Lower Expectations

In September, the Pittsburgh-based Allegheny Institute for Public Policy published a policy brief on the steep decline in revenues from the Act 13 impact saying counties and municipalities should “begin lowering their expectations” on the amount of support they receive from the shale gas industry. Read more here.

Big Hole In DEP Funding

This same drop in drilling activity is also putting a hole in DEP’s funding because the Oil and Gas Program relies on new permit application fees to support the program.

On December 5, DEP told the Oil and Gas Technical Advisory Board there is a “very significant budget gap” in the funding needed for the Oil and Gas Regulatory Program again this year and that how to fund the program will be a serious topic of discussion in 2025. Read more here.

DEP is potentially looking at permit application fees covering only 25% of what’s needed to fund the program for a year.

“You don't have to do very hard arithmetic to be able to figure out that that leaves us with a very significant budget gap,” said Kurt Klapkowski, DEP Deputy Secretary for Oil and Gas Management. “I would say that we're pretty close to the bone in terms of staffing and other things that we've been able to cut.” Read more here.

These budget impacts are the result of the way Pennsylvania has chosen to fund its Oil and Gas Program with per well fees when other methods would provide more stable funding.

Resource Links:

-- DEP Sees ‘Very Significant Budget Gap’ In Funding Oil & Gas Regulation Program Due To Reduced Permit Fee Revenue [PaEN]

-- Independent Fiscal Office Reports Slight Increase In PA 3rd Quarter Natural Gas Production; Lowest Number Of New Shale Gas Wells Drilled Since 2008; Big Hole In DEP’s Budget [PaEN]

PA Oil & Gas Industry Public Notice Dashboards:

-- PA Oil & Gas Weekly Compliance Dashboard - Dec. 7 to 14 - Failed To Restore Shale Gas Well Pad, Impoundment For 12 Years; Spills On Top Of Spills [PaEN]

-- What The Shale Gas Industry Is Leaving Behind: DEP: Nucomer Energy LLC Fails To Restore Shale Gas Well Pad, Water Impoundment In Forest County For More Than 12 Years After Drilling Was Completed [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices, Opportunities To Comment - December 14 [PaEN]

-- DEP Invites Comments On 2 PA General Energy Company Pipeline Projects Impacting Exceptional Value Streams And Wetlands In Lycoming County To Support Shale Gas Development [PaEN]

-- DEP To Hold Jan. 28 Hearing On Title V RACT 3 Air Quality Permit For Monroe Energy LLC Trainer Refinery In Delaware County [PaEN]

-- DEP Posted 107 Pages Of Permit-Related Notices In December 14 PA Bulletin [PaEN]

Related Articles This Week:

-- DEP Forms Internal Work Group To Develop Position On Road Dumping Conventional Oil & Gas Wastewater; Shapiro Administration Supports Legislative Ban On Road Dumping [PaEN]