Debunking Marcellus Shale Impact Fee Myths

Gov. Tom Corbett’s Commission on Marcellus Shale released its findings last week, and among the 137 pages of recommendations (see attached PDF) was the suggestion of implementing a for natural gas drilling companies. The details of the Impact Fee will surely be one of the hottest topics of debate when the Legislature takes up the issues in the coming months.

While no one knows what the specifics of the local impact fee look like yet, there are a few misconceptions floating around which should be addressed and shot down right now.

1. An Impact Fee is Not a Tax

People often roll their eyes at this and say there is no difference between a local impact fee and a severance tax. There is an absolute difference, and it is not just political doubletalk. A severance tax would go the state’s general fund and be swallowed up in the state budget, while a local impact fee is designed to stay in the area in which it is collected and some targeted statewide programs that specifically address the local environmental impact of gas drilling.

2. Leaseholders Should Not Have to Pay a Portion of an Impact Fee

This is another huge difference between a severance tax and a local impact fee. Most standard leases signed by local landowners have language stating that the landowner is responsible for a portion of a tax that might be passed. Landmen from drilling companies are telling local property owners the company—not the landowner—will be responsible for paying the entire impact fee. If you are in the process of negotiating a lease, you should have specific language to that effect written in the contract before you sign.

3. A Local Impact Fee Will Not Be Passed Along to Consumers

Several constituents have voiced this concern, but it doesn’t hold water for many reasons. Natural gas is a commodity traded on a global market. In fact, natural gas has become much cheaper, dropping from $13 per mcf (or 1,000 cubic feet) in 2008 down to about $4 per mcf now. Much of this drop has been attributed to domestic natural gas production—shortening transmission of the gas basically cut the costs in half. This industry is dealing with hundreds of millions of dollars; an Impact Fee would be a microscopic part of the massive return they get from each well. The fee simply will not be seen in your home heating bill, and anyone who says otherwise needs to produce some solid proof. 

4. The Natural Gas Industry Supports an Impact Fee

Gas industry leaders have publicly stated on numerous occasions they support paying an impact fee. They natural gas industry was heavily involved in Governor Corbett’s Marcellus Shale Advisory Commission, which unanimously recommended an impact fee.

5. A Local Impact Fee Will Not Hurt the Local Economy

By supporting an impact fee, the industry is making a clear statement that it isn’t going anywhere even if it has to pay the fee. It knows a local impact fee is way better for them than a severance tax, which every major gas-producing state but Pennsylvania already has in place. Local taxpayers will save money through an impact fee, because until we pass one, the impacts are being paid for by residents through local tax dollars, not the companies who are making the profits.

6. An Impact Fee is Not a Democrat or Republican Issue

Marcellus Shale is an issue too complicated and multi-faceted to be easily split along political party lines. Many Republicans support a local impact fee, and so do many Democrats—three of the legislative proposals introduced are by Republicans, and mine is the only Democratic proposal so far. The issue is more about what part of the state you come from than which political party you belong to.

The details of any local impact fee proposal will likely consume the headlines for many months to come. The decisions we make on Marcellus Shale will have repercussions for decades, so there should be healthy and honest public debate. Hopefully we can all be informed enough to separate the true issues from the myths and misconceptions.