Corbett Signs a Principled Natural Gas Impact Fee

     Pennsylvania Governor Tom Corbett, a Republican, recently signed the bill to impose an impact fee on natural gas drillers, thereby keeping his promise not to impose a tax on the industry in addition to the high state corporate taxes it already pays.

     As I have posted repeatedly, natural gas drillers do pay state business taxes in Pennsylvania, as well as various local government taxes, in addition to the increase in tax revenue the industry generates from landowners’ royalties and from employment and other economic activity. The push from the left to get the drillers to “pay taxes” implies otherwise. What the liberals meant is that they wanted to single out one industry to pay an additional tax, even though the industry is of enormous fiscal and economic benefit to the state. 

     A responsible impact fee differs from a tax because it is intended to offset the extra expenses generated by the industry subject to the fee, not simply to raise revenue like a tax. However, a small portion of the money from the natural gas impact fee will be diverted for other purposes, which arguably makes it a tax to that extent. Nevertheless, it generally maintains the principled practice of imposing mostly a fee, not a tax. 

     In addition, the new law eliminates the power of local governments to prohibit drilling. This provision is sound because natural gas drilling is a statewide interest while local concerns about the impacts are addressed by the new law. Counties and local municipalities benefit much from the industry because of increased local taxes and road improvements made by the drilling industry. Thus, the new law offsets the burdens of the industry from local government, while allowing it to keep the benefits.

     Meanwhile, all Pennsylvanians are benefiting not only from the extra tax revenue generated by the industry, but from lower electricity prices, in addition to those who are receiving lower natural gas bills. Thousands of Pennsylvanians are benefiting through employment by the industry or by the economic activity the presence of natural gas drillers generates. As natural gas burns more cleanly than coal, natural gas drilling is an environmentally safer method of electricity generation. The Commonwealth’s new impact fee and environmental regulation strike the proper balance between economic and environmental concerns. While Pennsylvania is benefiting from the Marcellus natural gas play, the new law lays the groundwork for the future drilling of the larger Utica play that underlies it.