A democratic lawmaker in Pennsylvania is drafting legislation that would change state law to more clearly define what constitutes a stripper well, following a ruling last month from the Commonwealth Court that some fear could result in a decline of impact fee revenues.
State Rep. Pam Snyder, who represents counties in southwest Pennsylvania that have been heavily impacted by shale development, said the court's decision put impact fees in "disarray." She added that her legislation would preserve those revenues and said the bill is supported by state Public Utility Commission (PUC) Chairman Gladys Brown.
Brown recently sent a letter to Democratic Gov. Tom Wolf urging a change of language in Act 13, which established the impact fee in 2012. Brown wrote that commissioners believe the court's decision contradicts the meaning of the law and the intention of the General Assembly. Wolf agreed and said his administration supports the current impact fee structure and communities across the state that rely on it.
The commonwealth court decided to reverse a PUC order that would have required Snyder Brothers Inc. to pay nearly $500,000 in impact fees, interest and penalties. Snyder claimed that the state's definition of a stripper well -- an unconventional well that is "incapable of producing more than 90 Mcf/d during any calendar month" -- meant that it didn't have to pay the fees and charges.
The PUC has maintained that a well is not a stripper well and is subject to the impact fee if it exceeds minimum production levels in one calendar month in a year. The court determined that the word "any" in the definition unambiguously means "any" or "one" and not "all" or "every" month.
Brown recommended in her letter that the General Assembly simply replace the word "any" in the definition with the word "every." Rep. Snyder's bill would do just that. The court's interpretation, she said, "would reduce payments by an estimated $16 million a year and harm the communities that support and host the Marcellus Shale industry." If the court's decision is allowed to stand, proponents of a change to the law fear producers could suppress production for one month out of the year to avoid paying impact fees.
The fees are levied on all shale wells during their first 15 years of operation if they produce above the threshold. The fee schedule and the amount companies must pay for each well depends on the number of years they've produced. The court's opinion comes at a time when impact fees are already projected to decline because fewer wells were drilled in 2016 -- the next period for which they are due. The fee is highest for wells in their first operating year.
Impact fees are overseen by the PUC. They are collected for distribution to local communities where drilling occurs and state agencies. A PUC analysis projects that about 2,400 active wells could revert to stripper well status if the law is not changed.