Marcellus Shale Impact Fee: Principles and Facts on Taxing Natural Gas

Companies should pay for the cost of government they use. Many advocates of a new tax simply want more money for Harrisburg politicians to dole out.

Five Principles
1. Businesses should pay the cost for government they use. If a business is not paying for its negative impacts on the environment and/or infrastructure, it is appropriate to charge a fee to pay for the government's cost to remediate the problem. Since drilling's impact on government does not increase if a gas well is more profitable, a "fee" should not be tied to production.

2. Any fee should be directly related to uncompensated costs of government. A new fee should not be imposed to extract additional revenue for unrelated government purposes or subsidies. For example, Growing Greener is not directly related to remediating problems caused by the natural gas industry.

3. Any fee rate should be established in the context of what businesses are already paying in taxes, fees, and contributions to local communities and the state, setting the fee rate at a level to only cover those uncompensated costs of government.

4. Any fee should be imposed at the county or municipal level, not at the state level. This ensures competition between local governments, discourages excessive fee rates, and reduces the threat of crosssubsidization and redistribution of additional fee revenues to unrelated government purposes.

5. Before imposing a new fee, elected officials should consider if current local taxes and fees should be revised to cover any uncompensated costs of government. For example, would it be appropriate to adjust local hotel and emergency services taxes to better address the influx of large numbers of workers into sparsely populated areas of Pennsylvania? Or, are there other fee/tax mechanisms that can be more directly tied to any uncompensated costs of government?