Independent Fiscal Offices Estimates Act 13 Drilling Impact Fee Revenue To Increase By Nearly $75 Million In 2022

On October 7, the Independent Fiscal Office reported revenue from the Act 13 drilling impact fee could increase by nearly $75 million to a total of $221 million in April 2022 up from $146.2 million in 2021, due to the significant increase in the price of natural gas.

If it does, it will reverse a decline in revenue since 2018 when revenue from the fee was $251.8 million

The near-month settlement price of natural gas on the New York Mercantile Exchange (NYMEX), upon which Pennsylvania’s Impact Fee is based, is $5.84 per MMBtu for October. 

This is the highest monthly price recorded since enactment of the fee in 2011.

National and regional prices recorded significant gains in 2021 due to the combination of weaker-than-usual supply growth and demand rebounding from closures and mitigation efforts related to the COVID-19 pandemic in 2020.

Through October, the NYMEX average price is $3.41 per MMBtu, which represents an increase of $1.33 (+64.1 percent) over 2020 and would be the highest full-year average price since 2014.

In June, the IFO estimated that if the average NYMEX price for 2021 ranged from $3.00 to $4.99, then Impact Fee collections (remitted April 2022) would be $221 million, an increase of $74 million (+51 percent) over the prior year.

Because only two months remain to determine the final average price for calendar year 2021, natural gas prices would need to collapse to $0.95 per MMBtu for that scenario to not hold. 

Given current market conditions, that outcome is highly unlikely. Futures markets suggest that prices will remain elevated for the remainder of the year due to global supply and demand pressures. 

Visit the PUC’s Act 13 Drilling Impact Fee webpage for more information.

[Posted: October 7, 2021]  PA Environment Digest