HOUSTON – Anadarko Petroleum, Chesapeake Energy and others will pay the state of Pennsylvania about $225 million in fees this year for drilling in the gas-rich Marcellus Shale — too little, according to critics of the state law setting the fee say.
The fees, enacted in 2012, flow to local governments to fund basic needs like bridges, roads, firefighting equipment and environmental programs. By the end of the year, the recurring charges on nearly 6,500 natural gas wells will have brought more than $630 million to state coffers.
“We are building a stronger Pennsylvania by harnessing our abundant resources to create jobs for working families, reinvest in our local communities, and protect our environment for generations to come,” Pennsylvania Gov. Tom Corbett said in a written statement last week, saying the fees are “making sure our world-class energy industry grows in a responsible way.”
According to SNL Energy, Corbett said at an industry conference earlier this year he wants to see oil companies invest more and even build headquarters in Pennsylvania. He added the state won’t roll over to the industry, but wants to “buy in” to the increased investment in the state’s Marcellus and Utica shale plays.
Calls for higher fees
Fort Worth-based Range Resources paid the most with $27 million in fees last year, followed by Oklahoma City’s Chesapeake with $26.6 million. Anadarko, which is based in The Woodlands, paid $12.3 million in fees last year. Two Houston-based oil producers, EOG Resources and Cabot Oil & Gas, paid $4.5 million and $13.2 million, respectively, last year.
But Corbett’s political opponents, including state lawmakers, want the oil and gas companies to pay more. They point to a report from the state’s independent fiscal branch that found Pennsylvania’s drilling fees were lower than severance tax rates on gas production in Texas and other states, which do not have drilling fees.
Severance taxes are based on production volumes. Pennsylvania levies a fee for each well that is drilled. But critics of the fees haven’t acknowledged the state also requires companies to pay one of the largest corporate income taxes in the nation and other levies, Corbett spokesman Patrick Henderson said in an interview with FuelFix.
Natural gas: Marcellus Shale growing faster than expected
The report, he said, did not draw out an “apples-to-apples” comparison between Pennsylvania’s fees and severance taxes in other states. The fees, which recur on individual wells over 15 years, are also based on variables like natural gas prices. Many in the state’s two legislative chambers believed they should charge more for shale drilling.
“Our argument all along is that they don’t take a look at other taxes that Pennsylvania assesses,” Henderson said. “We’re competing for capital investment with other shale plays. All of those are a factor in our business climate.”
The state law that created the drilling fees in 2012 has stirred controversy among local governments. State courts have erased provisions that required local governments to allow oil and gas development in any zoning area. Though some aspects of the law remain in different stages of appeal, the fees have remained untouched so far.
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