DEP Act 13 well report questioned
The state Department of Environmental Protection is disputing a recent study that claims it missed thousands of unconventional gas wells as it prepared a report for the state Public Utility Commission as Act 13 was being written.
The report, prepared by a group of Canadian academics and published this month in the journal Environmental Practice, estimates that between 15,300 and 25,100 unconventional gas wells were omitted from DEP’s Act 13 report for 2012.
The report, written by Joel Gehman of the University of Alberta and Diego Mastroianni, Angela Grant and Dror Etzion, all of McGill University, also claims that Pennsylvania may be missing between $205 million and $303 million in 2012 and as much as $750 million and $1.85 billion over the life of the wells in impact fees, many of which were drilled over the last century.
But the dispute may lie in the interpretation of the definition of unconventional wells.
“Pennsylvanians aren’t missing any Act 13 revenue,” asserted DEP spokesman Kevin Sunday on Friday when asked to comment on the report.
The authors cite language from the legislation that fees “are imposed on every producer and shall apply to unconventional gas wells spud in this Commonwealth regardless of when spudding occurred.” With that criteria, they argue, the act “implicitly required analysis of more than 350,000 wells known to have been drilled in Pennsylvania dating to at least 1858,” but notes that Act 13 considers all such wells to have been drilled in 2011.
The authors also fault the DEP for omitting some 15,300 unconventional gas well spuds, which they claim include more than 1,500 recently spud Marcellus wells.
The DEP claims it provided a complete list of wells to the PUC, which collects and administers the fee, and the wells the authors identify as omitted were never subject to a fee.
The paper also states that fee assessment depends on whether the well was spud in an unconventional formation defined as “a geological shale formation existing below the base of the Elk Sandstone or its geologic equivalent stratigraphic interval. Noting that the Elk Sandstone is a late Devonian age formation, the authors state that at least 12 shale formations are below the Elk and thus meet Act 13’s definition of an unconventional formation.”
But Sunday said the report indicates that the authors “don’t understand basic geology” and miss the point that “the legislation makes clear that fees are assessed on unconventional wells that are drilled in unconventional formations.”
The other criteria for assessing fees, he said, is that the unconventional well must be producing more than 90,000 cubic feet of gas per day.
He noted that wells from 50 or 100 years ago weren’t drilled using hydraulic fracturing techniques.
“And the idea that a well that was drilled 50 to 100 years ago is still producing more than 90 million cubic feet of gas is practically impossible,” he said.