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Answering Aunt Edna

Why don’t natural gas operators pay their fair share?

Answering Aunt Edna: Why don’t natural gas operators pay their fair share?

The Pennsylvania governor’s race will heat up between now and November, and one of the candidates keeps talking about a severance tax. Aunt Edna asks you, “why don’t natural gas operators pay their fair share?” Here’s how to set the record straight.

Breaking down the Pennsylvania Impact Fee

What is an impact fee?

Pennsylvania is the only state in the nation that levies an impact fee on unconventional natural gas producers, and its revenues are allocated to every county in the Commonwealth.

The impact is assessed and paid annually for each unconventional natural gas well a producer starts to drill. Each well is subject to the fee for a period of 15 years, and on average, a well will pay more than $300,000 in impact fees over this period.

In 2017, unconventional natural gas operators paid $209.6 million as a result of the impact fee, an increase of 20 percent from the previous year. The impact fee has raised $1.4 billion since enacted by the state legislature in 2012.

How is the money spent?

The revenues are split into four main categories, with the vast majority going to local governments. This revenue structure empowers county and municipal leaders to invest funds in community projects. The breakdown is as follows:

  • County and municipal governments where shale gas development occurs
  • All 67 counties for conservation, recreation and bridge repairs, including county soil and water conservation districts
  • State agencies, including the Pennsylvania Department of Environmental Protection and the Pennsylvania Emergency Management Agency
  • Statewide environmental grant programs, such as Growing Greener, the Marcellus Legacy Fund, and water and sewer infrastructure
What is Chevron’s contribution?

Chevron has paid a total of $68 million since the adoption of the impact fee in 2012. Our payments alone represent five percent of the total revenue generated from all operators in the state.

So there’s an impact fee. But the industry seems to be growing, can’t you pay more?

Natural gas operators pay the impact fee in addition to all the other Pennsylvania business taxes and fees, including:

  • Corporate or personal income taxes
  • Capital stock tax and franchise fee
  • Sales and use taxes
  • Liquid fuels taxes

Instead of viewing natural gas producers as a source of additional revenue, Pennsylvania should focus on maximizing the economic opportunity represented by our industry.

Action Item

We hope this information will help you answer questions you might receive regarding our industry. Share it on your social media channels to highlight the positive impact our industry has on the Commonwealth of Pennsylvania.
For more information about the impact fee, check out this interactive Pennsylvania Public Utility Commission website.

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