About 17 natural gas companies are expected to get invoices early this year for millions of dollars of impact fees they owe on low-producing shale wells after a state Supreme Court decision last week.
The Pennsylvania Public Utility Commission is in the process of generating invoices for shale gas producers who disputed and did not pay impact fees on some wells in recent years based on a legal debate about what counts as a “stripper well” that is exempt from the annual fees.
Judges disagreed about whether a well had to produce more than 90,000 cubic feet of natural gas per day for one month of the year — or every month of the year — for the fee to be imposed.
The state Supreme Court settled the debate Dec. 28, ruling that only wells that fall below the production threshold every month of the year can be considered stripper wells.
The decision confirmed the PUC’s interpretation but was a blow to the Armstrong County-based natural gas producer Snyder Brothers Inc. and the Pennsylvania Independent Oil and Gas Association, which had argued that the law’s exemption for stripper wells was more expansive.
Now the PUC is readying to collect fees that were left in limbo during the years-long case.
“We estimate that the recent Pa. Supreme Court decision will involve hundreds of wells with outstanding impact fees totaling millions of dollars,” PUC spokesperson Nils Hagen-Frederiksen said. The agency does not yet have precise figures.
Last June, Mr. Hagen-Frederiksen said 17 producers disputed that they owed fees on more than 300 wells due to the stripper well debate. That reduced the impact fee collection for 2017 by $6.1 million.
Producers disputed impact fees on 160 wells for 2016 and 35 wells for 2015, according to PUC records, although it is not clear if all of those disputes had to do with the stripper well definition.
PIOGA’s general counsel Kevin Moody said producers who agreed with the association’s interpretation of the stripper well definition had little choice but to withhold fees for their disputed wells while the case was being considered, because the law does not allow for refunds once fees are paid.
The Wexford-based trade organization is “extremely disappointed” and plans to ask the high court to reconsider its decision.
Among other issues, he said, the court appeared to ignore the law’s definition of a stripper well as one that is “incapable of producing” more than the threshold amount of gas in a month — and therefore accepted the PUC’s “absurd” position that drillers could otherwise simply choose to cut production for one month after 11 months of robust output to avoid paying impact fees.
Impact fees are distributed to state agencies, spent on statewide environmental projects, and sent to county and local governments to offset impacts to roads and services from drilling.