When Pennsylvania Gov. Tom Corbett approved Act 13 last month, he gave county officials across the state 60 days to impose an annual fee on unconventional gas wells, or to opt-out. With a month left until the April 14 deadline, almost all of the eligible counties are on the road toward imposing the fee, but the biggest potential hold-out also happens to be the most active county in the Marcellus Shale (see NGI, Feb. 20).

The 992 horizontal unconventional gas wells drilled in Bradford County through the end of 2011 account for nearly a quarter of all drilling in the state and could bring in nearly $50 million by some estimates.

But with two of the three commissioners publicly taking opposing positions on the fee, the issue could ultimately come down to the vote of the remaining commissioner, Doug McLinko. Although McLinko has said he doesn’t support the fee, in particular for its retroactive elements, he recently told the Towanda Daily Review that he might vote to impose it if the program has enough support at the municipal level.

Under the rules of the program, if a county chooses not to approve the fee this year, a majority of the municipalities within that county would have until June 13 to vote to overrule the decision and opt-in.

Because 60% of the revenue stays at the local level, Bradford and its municipalities could be walking away from millions if they opt out. And because 40% goes to the state, their decision affects agency budgets.

The Department of Environmental Protection (DEP) isn’t concerned about that uncertainty. “We’re not back-filling at DEP with these funds. We’re supplementing. If we get them, and when we get them, we will use them in an appropriate fashion,” DEP Secretary Michael Krancer said during recent budget hearings. “We are humming along quite well, and will continue to do so, on the basis of the fees that are generated through permitting” and efficient governance.

The most active operator in Bradford County, Calgary-based Talisman Energy Inc. with 480 wells, is critical of the timing of the fee. “I have to say that an impact fee coming in at a time when gas prices are $2.50/Mcf clearly doesn’t help in any way, shape or form as the industry is looking to make returns in a very difficult environment,” head of North American Operations Paul Smith told analysts recently. “Our personal view is: it’s done. The impact is relatively modest. But it does impact all of us producers in the Marcellus.”

The region of northeastern Pennsylvania that includes Bradford County is the heart of the dry-gas window of the Marcellus, where companies have been cutting spending in response to low prices (see NGI, Feb. 27).

Other counties in the dry-gas region aren’t as angst ridden about the decision.

Officials in Tioga County are scheduled to vote this week on the program — a sign of support given that opting-out requires no action. The 524 wells in the county could account for $26 million this year. Officials in Susquehanna County held a public meeting last week where residents generally supported the fee despite distaste for certain provision. The 401 wells drilled in Susquehanna County could generate $20 million this year. The three members of the Lycoming County Commission all publicly supported the fee before Corbett even signed it into law. The 398 wells drilled in the county could generate about $20 million this year.

The winds are blowing even harder toward a fee in southwestern Pennsylvania.

Washington County, the third most active county in the state and the most active in the liquids-rich portion of the play, approved the fee earlier this month. Its 464 wells should generate about $24 million in revenue. Range Resource Corp. drilled around 375 of those wells and is the biggest industry supporter of the impact fee. “We believe the commonwealth now has some of the strongest safety and environmental legislation in the country. Range pioneered or advocated for many of the provisions and it has been implementing these standards voluntarily in the field for some time,” COO Ray Walker said during a recent earnings call.

Allegheny, Armstrong, Beaver, Butler, Fayette and Lawrence counties have either approved the fee, scheduled a vote or plan to vote soon. The 321 wells in those counties would raise about $19 million.

“If we don’t do this, we chance losing this money,” Butler County Commissioner A. Dale Pinkerton told the Valley News Dispatch shortly after Corbett signed the impact fee into law. “So it’s important that we act as soon as we can so the money coming in will be divided among all the counties and we can get our share.”

Officials in Greene County plan to vote on the fee March 21. The 276 wells drilled in Greene would generate about $14 million. “I can only speak for myself, but I am in favor of the fee,” Board of Commissioners Chairwoman Pam Snyder told NGI. The most active player in Greene, EQT Corp., prided itself on supporting the fee back in November, calling the original Senate version “very reasonable.” The fee in the final bill is similar to that version, but keeps more revenue at the local level and shortens the life of the fee.

In central Pennsylvania, a region of growing importance between the two core regions of activity, Clearfield and Centre counties intend to adopt the fee, and neighboring Clinton County is headed that way too despite distaste for the program. “The money is a pittance compared to the cost of giving up zoning regulations locally, and giving up the ability to protect the environment and communities,” Clinton County Commissioner Joel Long told the Lock Haven Express, referring to provisions in the bill that restrict local regulation over drilling. The 254 wells in the three counties could generate about $12.6 million.

The Pennsylvania Public Utility Commission (PUC) is charged with collecting and distributing the fee.

The PUC recently posted answers to frequently asked questions to help stakeholders understand the new law. The PUC is also publishing a monthly list of eligible wells, as well as a backdated list of wells drilled through the end of 2011. That list will account for the first round of payments, due on Sept. 1, 2012.

The PUC will set the rate for wells drilled this year on Jan. 31, 2013 using a tiered structure set according to the average price of natural gas on New York Mercantile Exchange for the last day of the preceding 12 months and adjusted for the Consumer Price Index. The payments for the 2012 fee are due April 1, 2013.

The fee lasts for the first 15 years of the life of a well and decreases annually.

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