State Rep. Pam Snyder plans to introduce legislation that would clarify who has to pay the unconventional gas well impact fee under Act 13.
The act provides that marginally producing gas wells, known as “stripper wells,” are exempt from paying the impact fee. Currently a stripper well is defined as one that is incapable of producing more than 90,000 cubic feet of gas per day during any calendar month.
Recently, Commonwealth Court ruled a well is subject to the impact fee only if the well exceeds the 90,000 cubic feet of gas per day in every month of the year.
“(The) recent Commonwealth Court ruling put the impact fees in disarray,” Snyder said in a news release. “My measure would restore the fee structure so the municipalities and counties that host natural gas wells and the programs that impact fees support, would not be shortchanged out of millions of crucial dollars.”
Snyder said her bill would amend Act 13 and its unconventional gas well impact fees to stipulate that impact fees would apply to any well that produces 90,000 cf/d in any month of the year.
In March, the court reversed an earlier decision by the state Public Utility Commission that Snyder Brothers Inc. of Kittanning did not pay impact fees for about two dozen wells that produce small amounts of natural gas during the year.
In a 5-2 decision in favor of SBI and the Pennsylvania Independent Oil and Gas Association, the court concluded the majority decision was largely based on how Act 13 quantifies the production time frame with its use of the word “any.”
“We conclude that the word ‘any’ in the term ‘stripper well’ unambiguously means ‘any’ or ‘one’ and not ‘all’ or ‘every’,” Judge Patricia McCullough wrote in the majority opinion.
The two dissenting judges wrote that McCullough’s interpretation could encourage drillers to suppress production during one month to avoid paying impact fees for the year.
“The court exempted marginal, unconventional stripper gas wells if they failed to produce 90,000 cubic feet of gas a day in every month of the year,” Snyder said. “This interpretation would reduce payments by an estimated $16 million a year and harm the communities that support and host the Marcellus Shale industry.”
According to Snyder, her proposed change to the fee language is supported by the chairman of the PUC, which collects and disburses fee revenues. She said a PUC analysis projects that about 2,400 active wells could revert to stripper well status and not pay a fee based on the ruling.
“As reported, the state Independent Fiscal Office projects that shale gas companies will pay an estimated $175 million in impact on 8,200 wells for 2016, a record low even before the court ruling changed the calculations,” Snyder said. “My bill would reinstate valid thresholds for paying impact fees and protect the communities that are home to such a vital industry.”
When Commonwealth Court released its decision in late March, it was unknown whether the PUC would appeal it.
Snyder said Wednesday that she is not waiting for a PUC appeal, noting that the appeal process takes time.
By preparing legislation to clarify the fees, “We are making sure it goes down both paths,” she said.