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Pennsylvania Shale Drilling Fees Drop on Low Natural Gas Prices

Low natural gas prices have hit Pennsylvania, where deep-shale drilling fees collected last year fell about 3% from 2011, according to state data.

The Pennsylvania Public Utilities Commission (PUC) estimated that it would collect $198 million from the fees for 2012, down from $204 million in 2011. The state collects an impact fee instead of a severance tax under the omnibus Act 13. Payments, which were due April 1, provide revenue that is divided among various state entities.

The average annual price of natural gas used by the PUC to calculate well fees in 2012 was $2.78/Mcf, down from 2011's $4.08.

Last year the PUC cut the horizontal deep-shale well fee by almost $5,000 from 2011 fees to $45,000 per well because Act 13 ties the levy to the price of gas.

There were 1,357 new deep-shale wells drilled in Pennsylvania last year, according to the PUC. Almost all of those wells were horizontals and operators were charged a full $45,000 fee. Before 2012, 4,920 deep-shale wells had been drilled, for which operators were charged lesser fees. Fees levied under the law are reduced each year a well is in service.

Last year there also were 288 vertical deep-shale wells drilled, for which operators paid about one-fifth of what horizontal drillers paid as required under the law.

"The drilling is still robust in the western part of Pennsylvania and has tapered off somewhat in the other regions," said state Rep. Brian Ellis (R-Butler County), whose constituents live in one of the most prolific drilling areas. "I would not be extremely concerned if I were in Western Pennsylvania."

The fees collected are divided based on a formula that sends set amounts first to some state agencies. Most of the rest of the revenue goes to municipal and county governments based on where drilling is occurring by July 1.

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