The Pennsylvania Commonwealth Court this week reversed an order by the state Public Utility Commission (PUC) that would have required an independent oil and natural gas producer to pay nearly $500,000 in impact fee revenue, interest and penalties.
In a 5-2 opinion the court found that Pennsylvania-based Snyder Brothers Inc. would not have to comply with the PUC order issued last year. The PUC said Snyder failed to identify and pay impact and administrative fees for 24 vertical wells targeting the Marcellus Shale in 2011 and 21 wells in 2012. The parties were at odds over how state law defines stripper wells, which aren't required to pay impact fees.
Snyder claimed 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 PUC, however, claimed 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" month -- the commission was required to examine the statutory construction behind it.
"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," the PUC wrote in its order. "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."
The Commonwealth Court concluded that the "word 'any' in the term 'stripper well' unambiguously means 'any' or 'one' and not 'all' or 'every'" month. The dissenting judges wrote for their concern about producers curtailing production one month out of the year to dodge impact fees.
The impact fee is levied on all shale wells in the state during their first 15 years of operation if they produce above the threshold. Producers are required to self-report and submit the fee payments to the PUC for distribution to local communities and state agencies. Since it was enacted in 2012, the state has collected more than $1 billion.