Shale Development and Municipal Finances

Overview

Pennsylvania has experienced wide-spread drilling for natural gas in the Marcellus and Utica Shale formations, and has become the country's second largest producer of natural gas, behind only Texas. Although drilling can create jobs and income, it also brings public costs, especially for jurisdictions where drilling occurs. As a result, local governments in shale formations around the U.S. have experienced greater expenditures with more drilling.
  
Pennsylvania Act 13 was signed into law in 2012 and introduced a fee, called the “Impact Fee,” on unconventional natural gas wells. The Fee is distributed to local governments, and is intended to offset the public costs associated with shale gas development. The brief to the right examines how municipal finances have changed over time based on drilling activity or proximity to it.

Data

The dataset below provides municipal-level data for the years 2006 to 2013 and includes information on the number of wells drilled, the Impact Fees received, and key municipal financial outcomes.

File Name Download Link Last Updated
"PA Municipal Financial and Impact Fee Data 2006 to 2013" Excel Link January, 2015

Data Highlights

Municipalities by Group

In line with the geography of the Marcellus Shale, drilling activity varies across the state, with no wells drilled in municipalities in the southeast and much drilling in the northeast and the southwest. The dataset provides a variable (drill_group) that classifies municipalities into four groups based on drilling activity or proximity to it.



Municipalities by Group

Until 2012, municipalities in the High, Low, and Near Drilling groups experienced similar yearly changes in median revenue per capita (the median is the value for which half of municipalities in the group had a higher value and half had a lower value). In 2012, revenues increased dramatically for the High Drilling group, causing revenues in that year and in 2013 to exceed those of the other four groups. The increase primarily reflects the receipt of impact fee revenue, which first occurred in 2012.

 

Source: The Pennsylvania Department of Community and Economic Development (revenues) and The Pennsylvania Public Utility Commission (municipal well data). Monetary amounts are in 2010 dollars.

Compared to the Low and Near Drilling groups, the typical municipality in the High Drilling group experienced a consistent increase in expenditures from 2009 to 2012. Then in 2013, median expenditures per capita increased by roughly 40 percent while expenditures for the other three groups remained near their prior levels.

Source: The Pennsylvania Department of Community and Economic Development (expenditures) and The Pennsylvania Public Utility Commission (municipal well data). Monetary amounts are in 2010 dollars.

The Size and Importance of Impact Fee Revenues (by Group)

The typical municipality in the High Drilling group received $130 in Impact Fee disbursements per capita per reporting year, significantly more than the Low Drilling group, which received only $11 per capita, or the Near Drilling Group, which received even less. Additionally, Impact Fee revenue represented 31.6 percent of the typical High Drilling municipality’s average total revenue in the years immediately preceding the Impact Fee (2009-2011). The percentage was much lower for the Low and Near Drilling groups.

Source: The Pennsylvania Department of Community and Economic Development (municipal revenues) and The Pennsylvania Public Utility Commission (Impact Fee revenue and well data). The Impact Fee Per Capita is based on the median municipality (per group) for the average annual disbursement for reporting years 2011-2013. The Impact Fee as a Percent of Pre-Drilling Revenues is based on the median municipality’s average annual disbursement for reporting years 2011-2013 relative to its average annual revenues for the 2009-2011 period. Monetary amounts are in 2010 dollars.

Documentation

Data File

  • The dataset draws on the following data sources:
  • Pennsylvania Department of Community and Economic Development Municipal Financial Statistics (financial data, including revenues, expenditures, and fund balances, for the period 2006 to 2013.
  • Pennsylvania Public Utility Commission Data (Impact Fee disbursement and well counts each reporting year, for the period 2011 to 2013.

Data Notes

  • Although the Impact Fee was authorized in 2012, the Fee applied retroactively. In the dataset, all qualifying wells drilled prior to 2012 are treated as having been drilled in 2011. Fees collected for reporting year 2011 were collected and distributed with the Fees for reporting year 2012. In the dataset, Impact Fee revenues are assigned to the year they were distributed. Consequently, Fee revenue for reporting years 2011 and 2012 are both allocated to 2012. 
  • Some municipalities lack financial data for at least some years of the study period. The dataset includes all municipal observations for which some financial data existed over the 2006 to 2013 period. However, all statistics presented in the brief are based on municipalities with complete financial data.
  • All of the statistics reported in the brief are based on the median, which is the value at which half of municipalities have a greater value and half have a lower value.
  • All monetary values in the dataset are in nominal dollars. All monetary amounts in the brief are presented on this page are in constant 2010 dollars.

Variable Descriptions

In the Excel data file, each row represents a municipal observation from one year. Columns names correspond to the following variable names:

Variable Name

Description

 Units

mun_id

Five Digit Pennsylvania Municipal Code

Nominal Variable

mun_name

 

Municipality Name

Nominal Variable

co_name

 

County Name

Nominal Variable

year

 

Reporting Year

 Years

population

For years 2006-2009: 2000 Census Estimate of Municipal Population; For years 2010-2013: 2010 Census Estimate of Municipal Population

Number of People

tot_rev

Total Revenue

Dollars

tottax_rev

Total Tax Revenue

Dollars

tot_exp

 

Total Expenditures

Dollars

roads_exp

Road Expenditures

Dollars

fund_bal

Fund Balance

Dollars

spud_wells

Number of Wells Spud in the Municipality

Dollars

tot_act13

Act 13 Funds Received

Dollars

drill_group

Groups are defined as: “High Drilling” (municipality with more than the median number of wells drilled, among municipalities with wells), “Low Drilling” (municipality with less than the median number of wells drilled, among municipalities with wells), “Near Drilling” (municipality with no wells but in a county with a well), “Far Drilling” (municipality in a county without a well).

Nominal Variable:
High Drilling Low Drilling Near Drilling Far Drilling

full_data

“Complete” indicates financial data for all years (2006-2013); “Incomplete” indicates missing financial data for at least one year.

Nominal Variable: Complete Incomplete

 

Last updated: January, 2015
For more information, contact: Jeremy Weber

 

Center for Metropolitan Studies
3803 Wesley W. Posvar Hall, Pittsburgh, Pennsylvania 15260
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