Lower prices for natural gas last year will mean a 21% drop in drilling fee revenue for Pennsylvania's state programs and county and municipal governments even as production grew from exploration in the vast Marcellus Shale reservoir, according to new state estimates.
The Independent Fiscal Office projected Wednesday that impact fee collections for 2019 will be $198, a nearly $54 million drop from 2018, but still above 2016's low point of $173 million. Payments are due by July 1, and the money largely stays in drilling communities.
The drop breaks two straight years of rising revenue in Pennsylvania, the nation's No. 2 natural gas state behind Texas.
The Independent Fiscal Office said the decrease is largely due to the average annual price of natural gas on the New York Mercantile Exchange dropping below $3, which triggered a $5,000 per-well decrease in fees.
About 600 new wells were started in 2019, the second-lowest total in a decade other than 2016, when the average annual price also dropped below $3.
With 2019 production in Pennsylvania headed to a record 6.8 trillion cubic feet last year, the effective tax rate of the fee fell from 2.2% to 2.1% last year, the Independent Fiscal Office said.
The per-well "impact fee" was enacted in 2012.