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Act 13 Impact Fee revenues to surpass $630M for state of PA

Higher natural gas prices are expected to increase Pennsylvania's drilling fee revenue by 11%. As natural gas prices inch higher over the years, so too, do the fees natural gas producers pay to the state as part of the 2012 Act 13 impact fee assessed on unconventional wells. This year, the state of Pennsylvania expects to collect $224.5 million, according to data released by the Public Utility Commission April 11.

The average wholesale price for natural gas at Henry Hub rose 35% to $3.73 per million British thermal units (MMbtu) in 2013, a notable increase from 2012. According to the US Energy Information Administration (EIA), increased winter demand in 2013 “pushed inventories down and prices up to above $4.00/MMbtu in March and April, but decreased consumption for electric generation over the summer and positive (but flattening) production growth kept 2013 prices at their lowest level since 2002 with the exception of 2012.”

The growth of dry natural gas production from the Marcellus Shale— up 61% from a 2012 average of 6.5bcf/d to a 2013 average of 10.4bcf/d by EIA calculations based on data from Drillinginfo — contributed to the net increase in national production levels despite decreases in other basins. The Marcellus accounted for 75% of all production growth over the past year in the six basins (Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, and Permian) covered in the EIA's Drilling Productivity Report (DPR). The latest report shows Marcellus gas production in April 2014 at 14,759 million cubic feet/day, up 288 million cubic feet/day from the March 2014 totals of 14,470 million cubic feet/day, by far the largest increase in basins reported.

Despite a 21% decline from 2012 to 2013 in the total rig count in the Marcellus, natural gas output per rig rose by 47%, according to the DPR. "Production gains have come largely from northeastern portions of the basin producing drier natural gas, where output has benefitted from gathering line and pipeline capacity expansions. However, infrastructure improvements have also bolstered production in the wetter southwestern portions of the basin, which saw increased drilling in 2013," the report noted.

The combination of increased production and increased natural gas prices means higher revenue related to Act 13’s impact fee. Governor Tom Corbett, who signed the act into law on Feb. 14, 2012, noted April 14 that since 2012, Act 13 will generate more than $630 million through 2014. "Through Act 13, we are protecting public health and safety, safeguarding our environment, and making sure our world-class energy industry grows in a responsible way," Corbett said in a prepared statement. 

Range Resources Appalachia LLC and Chesapeake Appalachia LLC, two early movers in the play, hold large acreage positions and were the No. 1 and No.2 top payers of Act 13’s impact fees for reporting year 2013, respectively.

State officials expect to collect per-well fees to cover road work, conservation, housing and other costs related to the impact of drilling. The majority of Act 13 funds are directly distributed to counties and municipalities all across the state for a variety of environmental, public safety, infrastructure, emergency response and other authorized uses.

 

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