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Senator Scarnati outline impact fee proposal...read it here!
April 28, 2011
Senate President Joe Scarnati released his local impact fee proposal and held a conference call with reporters this morning. Below is a cut & paste from the summary and the spreadsheet.
Marcellus Shale Impact Fee
Senator Scarnati
Summary
- Computation
- Base Fee equals $10,000 (applies to horizontal/Marcellus wells only)
- Base Fee is adjusted independently for increases in production volume and price of gas
- Fee structure establishes a floor for expected revenues, but if production and/or prices move substantially higher, revenues will increase as well
- Fee is self-prorating for partial years through the volume adjustment factor
- Administration
- The Pennsylvania Public Utility Commission (PUC) will collect and distribute the impact fee
- The PUC will publish a twelve-month average price of natural gas on its Internet website for use in determining the applicable price adjustment factor for a calendar year
- Fees will be due for calendar year 2010 activity and shall be paid in two equal installments on August 1, 2011 and October 1, 2011
- The fees due for calendar years 2011 and thereafter will be payable on March 1st of the following year
- Revenue Estimate
- Estimate is calculated using industry average production per well and recent historical gas price of $4.50 or less
- Estimate assumes 1,500 new wells per year beginning in 2011 and each year thereafter
- The estimated revenue to be generated from the fee far outpaces the revenue that would be expected under an Arkansas-style tax model
- Preliminary estimates indicate that the fee revenue would approach the expected revenue received from a Texas-style tax model
- The $45 million fee revenue attributable to 2010 combined with the expected 2011 fee revenue of $76.2 million will result in cumulative fees of $121.2 million being collected by March 1, 2012
- Three-Way Distribution of Impact Fee
(1) Majority of the Impact Fee for local governments to be deposited into a newly established Local Services Fund
- The local Impact Fee revenue distribution between local governments shall be as follows:
- 36% to counties with producing unconventional gas wells
- 37% to municipalities with producing unconventional gas wells
- 27% to municipalities having no producing sites but located in counties with producing unconventional gas wells
- The local Impact Fee revenue may be used for the following purposes:
- Reconstruction, maintenance and repair of municipal roadways and bridges
- Preservation and improvement of municipal water supplies
- Maintenance and capital improvements to municipal waste and sewage systems
- Preservation and reclamation of the surface waters of the municipality
- Other lawful purposes reasonably related to the health, welfare and safety consequences of severing natural gas in the municipality
(2) A portion of the fee dedicated to conservation districts statewide
(3) A portion of the fee utilized to address statewide environmental and infrastructure impacts to include funding for the following:
- Environmental cleanup projects distributed through the Commonwealth Financing Authority
- Water and sewer infrastructure
- Impacted State highway improvements
- Hazardous sites cleanup
- Local Zoning
- Require the PUC to publish a model zoning ordinance that includes standards set forth in the bill
- Prohibit a municipality that adopts a zoning ordinance which exceeds the model from receiving funding from the local impact fee
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2010
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2011
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Well Life (Years)
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Well Fee Based on Average Production/Price
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Number of Wells
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Total Fee
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Well Life (Years)
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Well Fee Based on Average Production/Price
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Number of Wells
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Total Fee
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1
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$ 25,000
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1200
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$ 30,000,000
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1
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$ 25,000
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1500
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$ 37,500,000
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2
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$ 20,000
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600
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$ 12,000,000
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2
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$ 20,000
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1200
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$ 24,000,000
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3
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$ 20,000
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150
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$ 3,000,000
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3
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$ 20,000
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600
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$ 12,000,000
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4
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$ 15,000
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25
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$ 375,000
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4
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$ 15,000
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150
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$ 2,250,000
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5
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$ 15,000
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5
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$ 75,000
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5
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$ 15,000
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25
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$ 375,000
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6
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$ 15,000
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0
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$ -
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6
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$ 15,000
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5
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$ 75,000
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7
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$ 15,000
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0
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$ -
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7
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$ 15,000
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0
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$ -
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8
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$ 15,000
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0
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$ -
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8
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$ 15,000
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0
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$ -
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9
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$ 10,000
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0
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$ -
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9
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$ 10,000
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0
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$ -
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10
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$ 10,000
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0
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$ -
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10
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$ 10,000
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0
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$ -
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$ 45,450,000
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$ 76,200,000
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2012
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2013
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1
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$ 25,000
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1500
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$ 37,500,000
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1
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$ 25,000
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1500
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$ 37,500,000
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2
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$ 20,000
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1500
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$ 30,000,000
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2
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$ 20,000
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1500
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$ 30,000,000
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3
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$ 20,000
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1200
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$ 24,000,000
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3
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$ 20,000
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1500
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$ 30,000,000
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4
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$ 15,000
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600
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$ 9,000,000
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4
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$ 15,000
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1200
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$ 18,000,000
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5
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$ 15,000
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150
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$ 2,250,000
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5
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$ 15,000
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600
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$ 9,000,000
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6
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$ 15,000
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25
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$ 375,000
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6
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$ 15,000
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150
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$ 2,250,000
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7
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$ 15,000
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5
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$ 75,000
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7
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$ 15,000
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25
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$ 375,000
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8
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$ 15,000
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0
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$ -
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8
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$ 15,000
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5
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$ 75,000
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9
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$ 10,000
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0
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$ -
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9
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$ 10,000
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0
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$ -
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10
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$ 10,000
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0
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$ -
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10
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$ 10,000
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0
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$ -
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1500
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$ 103,200,000
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$ 127,200,000
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2014
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2015
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1
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$ 25,000
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1500
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$ 37,500,000
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1
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$ 25,000
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1500
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$ 37,500,000
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2
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$ 20,000
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1500
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$ 30,000,000
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2
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$ 20,000
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1500
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$ 30,000,000
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3
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$ 20,000
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1500
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$ 30,000,000
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3
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$ 20,000
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1500
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$ 30,000,000
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4
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$ 15,000
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1500
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$ 22,500,000
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4
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$ 15,000
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1500
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$ 22,500,000
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5
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$ 15,000
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1200
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$ 18,000,000
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5
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$ 15,000
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1500
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$ 22,500,000
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6
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$ 15,000
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600
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$ 9,000,000
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6
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$ 15,000
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1200
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$ 18,000,000
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7
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$ 15,000
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150
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$ 2,250,000
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7
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$ 15,000
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600
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$ 9,000,000
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8
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$ 15,000
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25
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$ 375,000
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8
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$ 15,000
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150
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$ 2,250,000
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9
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$ 10,000
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5
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$ 50,000
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9
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$ 10,000
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25
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$ 250,000
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10
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$ 10,000
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0
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$ -
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10
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$ 10,000
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5
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$ 50,000
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$ 149,675,000
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$ 172,050,000
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Estimated Severance Tax Receipts Using Arkansas Tax Model ($ millions)
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Assumed Gas Price = $4.28/Mcf
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2010
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2011
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2012
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2013
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2014
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2015
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$25.6
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$38.3
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$56.8
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$83.9
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$109.9
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$140.2
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Note:
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1 The Impact Fee revenue estimate is based upon a conservative model utilizing an estimated ultimate recovery (EUR) factor of 3.8 billion cubic feet (bcf)
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of gas per well. Recent projections suggest that the EUR from a typical Marcellus Shale gas well may exceed 5.0 bcf. To the extent that the increased
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EUR projections hold true, the revenue estimates shown here may be significantly understated.
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Scarnati Unveils Drilling Impact Fee Proposal: Says Budget Won't Pass Without It.
Capitol Ideas with John L. Micek (blog) - Joe Scarnati
While the cash raised from the fee is only a drop in the bucket toward closing a projected $4 billion deficit, Scarnati said lawmakers cannot escape the political reality that voters believe drillers are getting a pass while other parts of the state ..
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