Natural gas drillers paid 20% less impact fees this year, Pa. Public Utility Commission data show.
Revenues are projected to drop again next year due to a mild 2020 winter and decreased demand for natural gas due to the COVID-19 pandemic, the Independent Fiscal Office projected.
Payments by natural gas drillers statewide dropped by $51.4 million compared to last year, mostly due to cheap natural gas prices, PUC data show.
"Without significant recovery in national and regional prices, impact fee collections will remain at CY 2019 levels or move lower," the IFO's Jesse Bushman and Rachel Flaugh wrote.
When the average price of gas drops below $3.00 per MMBtu, impact fees collected drop by $5,000 per well.
The average annual price of natural gas dropped to $2.63 per MMBtu on the New York Mercantile Exchange in 2019, the IFO said.
Gas prices of haven't been that low since 2016.
"These market conditions have discouraged new drilling activity, and Pennsylvania production growth has been decelerating for the last several quarters," Bushman and Flaugh said.
Bradford County saw the region's most dramatic drop in impact fee revenue, down 22% from last year. The county received $4.8 million for 2019 compared to $6.2 million in 2019. The county hosted 1,375 wells subject to the fee.
Lycoming County's distribution fell 20%, from $4.2 million in 2018 to $3.4 million in 2019. The county hosted 964 wells subject to the fee.
Tioga's impact fee distribution fell 19%, from $3.4 million in 2018 to $2.7 million in 2019. The county hosted 986 subject wells.
The number of wells spudded in 2019 decreased but there were enough new wells to offset reduced collections from older wells, the IFO said.
"We just have to tighten our belts," State Representative Jeff Wheeland (R-83) said about the smaller disbursements.
"When you don't have the demand for energy, prices are going to go down and exploration will slow up," Wheeland explained. "We have to get through this pandemic."
State Representative Garth Everett (R-84) did not respond to a request for comment on the shrinking impact fee collections.
Instead Everett painted a rosy picture in a press release on June 24, praising this year's impact "tax" collection.
If impact fees were a tax - which they're not - this year would be the state's lowest levy yet.
Drillers paid an implied effective tax rate of just 2.1%, according to the IFO.
Texas taxes their natural gas producers at a 7.5% rate.
There is no severance tax on natural gas in Pennsylvania - the only major gas-producing state without one, according to a StateImpact report.