Shale gas impact fees expected to drop again in Pennsylvania

A drilling rig on Range Resources Corp.'s Kendall well pad is visible across farmland in Bulger, Friday, March 20, 2015. (AP)

Pennsylvania’s total impact fee collections from shale gas wells are expected to fall again next year amid continued low prices and scant new drilling, according to projections released Thursday by the state Independent Fiscal Office.

Total fees paid by drillers are expected to decline between $5.4 million and $56.5 million from this year’s record-low collection of $187.7 million, minus late or disputed payments from prior years.

The office’s least optimistic of three scenarios contemplates that a drop in the annual average price of gas on the New York Mercantile Exchange will drive down the impact fee by $5,000 per well for most wells. That would translate to a total collection of $129.3 million.

Its middle scenario anticipates the currently sluggish pace of drilling will remain the same for the rest of the year but the price schedule will not drop, resulting in a $15.2 million reduction in impact fee collections to $170.6 million.

The number of new wells drilled in the first half of 2016 declined by 60 percent compared to the same period last year, the office said. If that trend continues, only 329 new wells will be drilled this year.

In the highest-revenue case, drilling will pick up to match the pace from the second half of last year and the fee collection will total $180.4 million.

Impact fees are collected each April on wells tapping the Marcellus Shale and other deep shale layers. They are distributed by July to host communities, as well as to statewide environmental, infrastructure, emergency management and housing programs.

Pennsylvania’s impact fees have cumulatively raised $1.04 billion since they were first levied in 2012.

In the long term, new pipelines to major markets in other states would allow prices to rebound, the Independent Fiscal Office said, but several large projects have been delayed or canceled and analysts are now unsure when the price increase will occur.

“If these conditions hold, then drilling activity will likely remain subdued through 2018, and impact fee revenues will have limited opportunity for growth,” the office said.