Marcellus Shale Tax Policy

Issue Spotlight: Pennsylvania's Natural Gas Impact Fee

The Effective Rates of Natural Gas Severance Taxes in Texas and West Virginia Clearly Outperform PA's Impact FeeIn 2012, Pennsylvania enacted an “impact fee” on natural gas wells drilled into Pennsylvania’s Marcellus Shale that generates a relatively small amount of revenue from the expanding gas industry. PBPC estimates that, using a “moderate” production scenario, Pennsylvania's impact fee will bring in less revenue than a severance tax comparable to that of Texas or West Virginia. As production increases over time, the gap grows larger between the revenue generated at the West Virginia or Texas tax rates and from Pennsylvania’s impact fee.

Latest Report: Gas Production Booms, Drillers’ Corporate Tax Payments Plummet

Act 13 Impact Fee: Falling Short of Severance Tax

Shale Case Studies: A Look at Shale Drilling’s Mixed Legacy

Shale Impact: Learn More About Marcellus Shale and its Impact on the Economy and Services

Responsible Growth: How a Severance Tax can Help Protect Pennsylvania

Browse Marcellus Shale Tax Publications Below

In 2014, Pennsylvania became the second-largest natural gas producer in the U.S. and remains so today, behind only Texas.  In 2017, gas production exceeded 5.3 trillion cubic feet and continues to rise. Despite rising production, Pennsylvania remains the only major gas-producing state that allows companies to drill without paying taxes that increase with the volume of gas extracted. 

A response to some of the most frequent criticisms of intituting a severance tax in Pennsylvania. 

Natural gas drillers pay between 7-37% less in corporate net income taxes than they did at the beginning of the boom (2011-12) despite a quadrupling of the amount of gas drilled in PA.

Updated 6/5/18 by PBPC Policy Analyst Diana Polson.

In the past several months, Pennsylvania’s legislature has shown renewed interest in enacting a severance tax on natural gas extraction as part of the state’s overdue revenue package to fund the state budget. In that context, the natural gas industry has maintained a steady drumbeat of communications claiming that Pennsylvania already has a tax on gas extraction because of its per well impact fee which does not rise with the volume or value of gas drilled. The industry and its allies also continue to claim that Pennsylvania’s impact fee amounts to a tax that is higher (relative to the volume or value of gas produced) than the severance taxes in many other states.

In his budget address, Governor Wolf observed that Pennsylvania faces a choice of two paths. Taking one path would require us to deal with the reality of our structural deficit and raise revenues to close it. It would enable government to continue to meet its responsibilities to educate our children, serve those who need our help, protect the environment and encourage economic growth. Taking the other path would require us to accept devastating cuts to education and health and human services.

In a democracy, public policy is ideally made after extensive public deliberation and debate. Deals made in private and announced at the last minute make it impossible for citizens to understand and evaluate the actions of their legislators or for advocates to mobilize citizen opinion on the critical issues of the day. Unfortunately, the last few days have given us two striking examples of the failure to live up to this fundamental democratic norm.

On Tuesday, November 10th, Governor Wolf and legislative leaders announced a budget framework for 2015-16.  While an agreement could be good news, some key issues have not been addressed.

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