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Pennsylvania Producers to Pay Less as 2015 Impact Fees Decline

Pennsylvania's shale gas drillers will pay $5,000 less per well in impact fees for the 2015 collection year, the state Public Utility Commission (PUC) said in a bulletin published over the weekend.

The annual adjustment comes as no surprise given the steep year-over-year decline in the New York Mercantile Exchange (Nymex) benchmark price for natural gas. The PUC said the Nymex Henry Hub average for 2015 was $2.664/MMBtu, down from $4.415/MMBtu in 2014.

Enacted in 2012, the impact fee is charged for all unconventional wells in the state during their first 15 years in operation, regardless of how much they produce. It is calculated with a multi-year schedule that is based on the average annual price of natural gas. Since the fee was passed into law in 2012, the PUC has collected nearly $856 million for distribution to local counties and municipalities where drilling takes place and to state agencies (see Shale Daily, June 11, 2015).

The adjustment matches a projection released last July by the Independent Fiscal Office, which said impact fee revenue would decline somewhere between $14.9 million and $33.9 million based on fewer wells being drilled and expected lower average gas prices (see Shale DailyJuly 7, 2015). The PUC said operators spud 43% less unconventional wells in 2015 than they did in 2014. In all, 785 unconventional wells were spud last year, compared with the 1,372 that were drilled in 2014.

Under the annual adjustment, per-well revenue would decline by about $5,000. A new well in its first year of production in 2015, for example, would generate $45,300, compared with the $50,300 in fees charged in 2014. Second year fees would drop to $35,200 versus $40,200 in 2014 and so on. Third year fees, however, would remain unchanged at $30,200.

Vertically drilled well fees declined by about $1,000. A first year well would be charged $9,100 for 2015, compared with $10,100 in 2014. All producers are required to self-report and submit annual impact fee payments to the PUC by April 1. Annual collections are announced after that deadline.

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