How Low Can You Go?

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The Pennsylvania House of Representatives is debating a Marcellus Shale impact fee today, and the Senate could take up its own plan later this afternoon. Unfortunately, both chambers appear to be playing a game of limbo to see how low they can go on a drilling fee rate.

The House bill (HB 1950) adopts Governor Tom Corbett’s approach to a drilling impact fee. It would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate. Senator Joseph Scarnati’s SB 1100, which was amended in committee Monday night, would raise $360,000 over the life of an average well, the equivalent of 2.2%.

As the Pennsylvania Budget and Policy Center noted today, a comparable well in Texas would raise $878,500 – five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100.  Even an industry-supported drilling tax proposal from August 2010 would collect more than these plans.

Other drilling tax and fee plans, proposed by Representatives Tom Murt and Gene DiGirolamo and Representative Marguerite Quinn, would put Pennsylvania more in line with other energy-rich states, assessing effective rates between 4.4% and 4.6% over the life of an average well.

As the legislative debates continue, keep in mind that the average Marcellus Shale gas well in Pennsylvania is projected to generate $16 million over its life.

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