When the state permitted counties to enact the drilling fee tax on Marcellus Shale drilling rigs, they gave the affected counties sixty days to do so. The tax allows the counties to charge $50,000 per rig for any rig drilled in their borders. The structure of the tax rates and who gets what money are detailed in our Policy Brief (Volume 12, Number 11). We concluded that with the new law mandating that the first $23 million in revenues going directly to state programs and then counties (and their municipalities) receive only 60 percent of the remaining revenues, it would be interesting to see which counties would enact the tax.
Since many counties are receiving millions in voluntary contributions from the drillers already, the concern was that by enacting the tax those contributions would dry up. Evidently some counties are willing to take that chance as two in the Pittsburgh area, Lawrence and Washington Counties, have passed the fee.
As we calculated in our Brief, it would take 460 wells paying the $50,000 fee to satisfy the State’s off the top take. After that each county/municipality only receives an amount equal to the proportion of wells (compared to total wells in the state) within its borders. For example Lawrence County has two wells while there are approximately 4,200 wells in the state. That means Lawrence County is set to receive only 2/4,200 or one half of one-tenth of a percent (0.05 percent) of the 60 percent of revenue after the state takes its cut off the top-Washington County with about 350 wells, fares better getting about eight percent.
The drilling impact fee does phase out over a series of years so unless there is a large amount of net new wells replenishing the coffers, the amount received over the next fifteen years will get smaller and smaller. Only time will tell if the revenues received from the fee will outweigh the loss of any voluntary payments or ill-will the drillers may have over the imposition of the new fee. But a couple of local counties are willing to take that risk.
