August February 2014 2014
Think you know Act 13? By Joe Baran, Principal & Laura Zewe, Managing Director - Analysis, Data Management and GIS Bertison-George Oil & Natural Gas Consulting What would you do with your portion of $630 million? That’s the question now facing the Commonwealth of Pennsylvania. Over the past three years Pennsylvania’s unconventional gas producers remitted $632,434,000 in Act 13 impact fees. Some of this money funneled into government oversight, a portion funded services like the Department of Transportation and the Fish and Boat Commission, and the Commonwealth’s counties and municipalities each received their own distributions.
While the recipients of Act 13 fees have been deciding where to invest their funds, at Bertison-George we have uncovered the reality behind Pennsylvania’s Act 13 distributions. Many qualified and self-appointed experts are debating the pros and cons of the tax structure. Their arguments are varied—some are valid, some miss the mark—but they all have one thing in common: they rarely showcase the intricacies of Act 13. Did you know that every Pennsylvania county is guaranteed a minimum Act 13 distribution of $25,000? Were you aware that of the seven municipalities recently involved in the Pennsylvania Supreme Court case over local zoning regulations for oil and gas development, one received
Average Expected Annual Act 13 Payment: County without eligible wells: $268,982.90 County with eligible wells: $3,180,801.91 $365,889 for its 2013 distribution without having a single Act 13 well drilled within its borders? In 2013, the year’s collected Act 13 fees amounted to $225,752,000. After allocating funds to oversight and state agencies, just over half of the total was doled out to counties and municipalities. Each county received a county-level distribution; municipalities received their own, individual distributions. Of the 67 counties in the Commonwealth, 37 with drilled, eligible wells and their municipalities shared $117,689,671; while, 30 counties without wells received $8,069,487 to divvy up. The pot from which counties and municipalities draw their money has been steadily increasing by $21,542,000 since 2011. That does not mean, however, that all counties are seeing an increase in their Act 13 distribution. From 2011 to 2013, the piece of pie for Bradford County and its municipalities shrunk by $2,842,627, the biggest decrease in the Commonwealth. However, during this time, Bradford County saw the drilling of 128 new, eligible wells. Why then would its distribution shrink? Easy: Bradford County did not maintain the same rate of drilling as the rest of the Commonwealth. A portion of Act 13 distributions are paid based on the number of eligible wells each county hosts as compared to the number of eligible wells within the Commonwealth. In 2011, Bradford was home to 21.9 percent of Pennsylvania’s eligible Act 13 wells. By 2013, Bradford could claim only 16.4 percent as its own. In brighter news, the Act 13 distribution to Washington County and associated municipalities has grown by $4,564,210 since 2011. Washington County outpaced others by drilling 429 Act 13 eligible wells in the past three years, jumping it from 11.1 percent ownership to 13.9 percent of the Commonwealth’s eligible wells. It isn’t only the counties with wells that are benefiting from Act 13 funds. Philadelphia County, without a single well to its name, received $1,483,017 in 2013. Something else in addition to the number of wells must affect Act 13 distributions. Comparison of Philadelphia, Fayette and Allegheny counties’ county-level distribution provides an excellent case study for how population can affect Act 13 funds. Although Allegheny County (with 31 eligible wells) and Philadelphia County (with zero wells) can barely hold a candle to Fayette County’s 205 eligible wells, Fayette only received $81,889 more in Act 13 distributions for 2013. How did Allegheny and Philadelphia make up for the lack of wells? By having 9.63 percent and 12.13 percent, respectively, of the Commonwealth’s total population; Fayette County can boast only 1.03 percent. In fact, Philadelphia County’s population alone provided more
The monthly journal of the Pennsylvania Independent Oil & Gas Association