Bertison-George, LLC

PIOGA Winter Meeting

Feb/24-25/2015

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Review of Historic Development

Severance Tax / Impact Fee – By the numbers

Summary

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Act 13

Impact Fee

Implemented

Severance Tax / Impact Fee – By the

numbers

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$7,500,000 - County Conservation Districts/State

Conservation Commission

$1,000,000 - Fish and Boat Commission

$1,000,000 - PA Public Utility Commission

$6,000,000 - Department of Environmental

Protection

$750,000 - PA Emergency Management Agency

$750,000 - Office of State Fire Commissioner

$1,000,000 - Department of Transportation

$2,500,000 - Natural Gas Energy Development

$123,151,200 - Direct to Counties and Municipalities

(includes Housing Funds)

$82,100,800 - Marcellus Legacy Fund12

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Variables:• Spud wells

• Commodity

Price

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Variables:• Production

• Commodity

Price

• Production

• Commodity

Price

• Spud Wells

• Commodity

Price

Results:Tax Method:Ohio:

2.5% Gas

$0.10 Oil

WV:

5% O&G +

$0.047 “temp”

PA:

Impact FeeOH and PA based on Unconventional production only. Utilizing HH pricing estimates will cause results to be overstated.

Ohio Ohio

Impact Fee Severance T ax

2012 8,855,000 448,526

2013 28,260,000 3,371,345

2014 15,850,000 10,107,110

52,965,000 13,926,982

PA PA *

Impact Fee Severance T ax

2012 204,210,000 168,717,253

2013 202,472,000 347,560,733

2014 225,752,000 523,779,237

632,434,000 1,040,057,223

* Utilizing Avg. HH Pricing and 3% Severance Tax Rate

Under Wolf proposal = $697 million 2014

WV WV

Impact Fee Severance T ax

2012 28,980,000 98,567,066

2013 13,410,000 114,252,434

2014 ?? 232,003,111

42,390,000 212,819,500

2014 Sev Tax Not included in total

Temp Fee Avg. 3.94%

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5% Severance + $0.047 per Mcf • Estimates that the total impact would be 5.8%

• For $0.047 to equal .8% the natural gas price

would need to equal $5.88 per Mcf.

• Based on Current HH March pricing $0.047 would

equal ~1.7%. ($0.047 / $2.83)

Total 6.7%

• Transco Z6 trading at a $1.8671 (premium Non-

winter months trading at a discount)

Total value $4.70 Vs. $5.88

Impact on conventional production

Cuomo won’t be in office for ever

Act 13 have resulted in hundreds of millions being

collected

• State and Local agencies have benefited

• Pennsylvania citizens have benefited

Can you spell OH..

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Questions for Wolf:• What will the split be between impact funding and

pensions/general fund?

• How can we find a Wolf administration’s math 101

tutorial?

• Factored into their analysis?:

How much additional gasoline taxes will be collected

from production companies and supporting industry

moving their equipment?

As always, the devil is in the details!

THANK YOU!

Joe Baran

Principal

Bertison-George, LLC

www.bertison-george.com

412-258-5262

Bertison-George, LLC

Office Locations:Headquarters Financial Branch4031 Old William Penn Hwy 200 Schermerhorn St

Murrysville, PA 15668 Brooklyn, NY 11201