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PUC Says Producer Owes Pennsylvania $500K in Impact Fees, Fines

The Pennsylvania Public Utility Commission (PUC) says an independent oil and gas producer owes the state nearly $500,000 in impact fee revenue, interest and penalties for 45 unconventional vertical gas wells targeting the Marcellus Shale.

In a 70-page opinion and order issued Thursday, the PUC said Snyder Brothers Inc., a company based in Kittanning, PA, owes the state a total of $499,520. Of that total, $390,250 is for impact and administrative fees dating back to 2011 and 2012, and $11,707.50 is for interest. The commission also levied a fine of $97,562.50.

According to the order, the PUC's Bureau of Investigation and Enforcement (I&E) said Snyder failed to identify and pay impact fees and administrative charges for 24 wells in 2011, and for another 21 wells in 2012 [Docket No. C-2014-2402746].

At issue are conflicting interpretations over how Act 13, the state's omnibus Marcellus Shale law, defines stripper wells.

Snyder had argued that the state's definition of a stripper well -- specifically, an "unconventional gas well incapable of producing more than 90 Mcf/d during any calendar month" -- meant that the company did not have to pay the fees and charges, if the well failed to reach the 90 Mcf/d threshold for any single month during the reporting period. The company also said that if there was any "reasonable doubt" over the definition of a stripper well, the PUC was obligated to rule in Snyder's favor.

But the I&E said that since the word "any" in the definition of a stripper well rendered the entire definition ambiguous -- because "any" could mean either "one or another taken at random" or "every" -- the PUC was required to examine the statutory construction factors behind it.

"In applying the factors, I&E contended that the objective of Act 13 is to provide relief to municipalities impacted by unconventional gas wells," the order said. "I&E warned that this objective would be frustrated by exempting active producing wells from paying impact fees because their production falls below 90 Mcf/d for one month... further, I&E argued that the legislative history of Act 13 supports its interpretation of the definition of a stripper well."

The PUC ultimately agreed, concluding that any well that produces more than 90 Mcf/d for any single calendar month meant the well was subject to the impact fee and administrative charges.

"One of the primary purposes of Act 13 is to collect impact fees and provide disbursements to the municipalities affected by unconventional gas wells," the commission said. "Adopting the interpretation [held by Snyder] would tend to impede the object of Act 13 under circumstances in which a vertical well is producing significant levels of gas.

"For example, if a well produces gas in excess of an average of 90 Mcf/d for 11 months of the year, but falls below the threshold in the twelfth month, the well would be exempt from the Act 13 impact and administrative fees. As a result, the community impacted by the significant levels of drilling, collection and distribution of gas from that well might not receive financial disbursements as Act 13 had intended. Thus, we view the arguments of [Snyder] as being a potential impediment to fulfilling the intent of Act 13."

The PUC said Snyder had 20 days to pay the charges.

In December 2012, the PUC voted unanimously to clarify several portions of Act 13, including the section on stripper wells (see Shale DailyDec. 21, 2012). At the time, Anadarko Petroleum Corp. and Talisman Energy Inc. had argued that the setting of conductor pipe did not constitute the spudding of a well.

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