Governor Wolf Proposes 6.5% Severance Tax

On February 7, 2017, Pennsylvania Governor Tom Wolf released his proposed 2017-18 budget for the Commonwealth, which includes a proposed 6.5% severance tax on natural gas. Under Governor Wolf’s plan, operators would be allowed to credit the amount paid in unconventional gas well impact fees against severance tax liability. Governor Wolf estimates that his tax proposal will result in over $290 million in revenue in 2017-18, and over $700 million in revenue per year by 2021-22. Governor Wolf has proposed a severance tax in each of his budget addresses thus far, but the Pennsylvania Legislature has yet to enact the tax.

In January 2017, the Independent Fiscal Office estimated that 2017 impact fee collections will total $174.6 million, which equates to an effective tax rate of 5%. The IFO’s estimated effective tax rate of 5% is significantly smaller than the 2015 effective tax rate, which was 6.9%. The IFO believes that the 2017 effective tax rate will decrease because there are not sufficient new wells to offset declines in older producing wells and because some older wells will fall below the 90 mcf threshold for tax liability. 

Thursday, February 09, 2017

Commonwealth Court to Again Hear Oral Argument on Impact Fees

In December 2016, the Pennsylvania Commonwealth Court agreed to hear additional oral argument in Snyder Brothers, Inc. v. Pa. Public Utility Comm’n. The case concerns the proper interpretation of Pennsylvania’s Act 13 of 2012, which exempts from the Commonwealth’s impact fee those unconventional gas wells “incapable of producing more than 90,000 cubic feet of gas per day during any calendar month . . .” Snyder Brothers argues that Act 13 exempts those marginal wells that are incapable of producing more than 90,000 cubic feet of gas per day during one or more months of the year. The Pennsylvania Public Utility Commission interprets the provision as requiring operators to pay the impact fee on each unconventional well that is capable to producing 90,000 cubic feet of gas per day in one or more months of the year. The PUC has ordered Snyder Brothers to pay $500,000 in impact fees on wells that have produced 90,000 cubic feet of gas per day in some, but not all, calendar months.
Tuesday, January 24, 2017

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