PA Counties Should Make Sure They Capture Shale Gas Fees
Pennsylvania’s Act 13 was signed into law on February 13, 2012. It provides for a small shale gas impact fee and addresses the regulation of shale gas development in the Commonwealth. [http://www.pacounties.org/GovernmentRelations/Documents/ShaleGasHB1950Analysis20120210.pdf] Under the Act, there is an impending deadline facing Pennsylvania counties that those not in the throes of active exploitation of the Marcellus Shale gas deposits may accidentally overlook, at significant cost to them.
Any county that has as few as one single spud well that fails to act to apply the fee within 60 days of the effective date of the Act will lose out on its share of Pennsylvania’s shale gas development revenues.
A “spud well” is the beginning of a well drilling operation. With the current depressed price of natural gas, well drilling has slowed substantially, Spuds may have been started and then activity ceased, so counties may have such initial drillings and have forgotten them in the absence of any visible drilling. Those jurisdictions could lose out on needed revenues.
Counties with no spud wells do not need to take any action to share in the revenues, the majority of which will be shared across the state, not reserved for the counties generating the funds. However, there is a risk thae counties with little known shale gas well drilling activity may have overlooked the odd well and may be prohibited from receiving fee revenues and from receiving revenues from other statewide initiatives for a period of a year after they finally approve imposition of the fee. http://www.pacounties.org/GovernmentRelations/Documents/ShaleGasHB1950Analysis20120210.pdf
Revenues from the shale gas fee can help offset the costs of shale development in the counties with extensive well digging. More importantly, they could support for education, training and economic development activities in other counties that are not enjoying the shale boom. Counties can ill afford to lose such revenues while experiencing a depressed economy and continuing state budget cutbacks. http://www.farmanddairy.com/news/pennsylvania-counties-look-to-marcellus-shale-impact-fee-for-funding/34637.html
County development organizations, including Economic Development Corporations and Industrial Development Corporations, need to make sure they are not losing out on revenues that could support their mission and enable them to do more to help their local economies to grow.
Strange as it might seem, some counties with extensive well development are contemplating waiving the fee on gas industry investors. http://pahomepage.com/fulltext?nxd_id=234822 There is some fear that the added cost (initially $40,000 - $60,000 per well per year, depending mostly on the price of gas) will drive companies away. Other concerns expressed have included reduced charitable giving by the mining companies over time. This fear is largely illusory, as the responses to questions posed to Bradford County drillers have made clear. http://thedailyreview.com/news/gas-drilling-companies-state-how-they-would-be-affected-by-bradford-county-gas-impact-fee-1.1283236. With all the opportunity in the world to claim major negative consequences from the impact fee, the drillers in the county responded to the local paper that the fee would have, at worst, marginal impacts on their operations. The gas under Bradford County cannot be tapped from other counties … there is a reason why there are over 1000 wells there already, and the industry cannot simply move away.
While the majority of Pennsylvania counties are on schedule to take action before their April 13 deadline, the odd spud well could be problematic for some who do not impose the fee — and others may lose out on revenues by deciding against the fee when the imposition would not be likely to cost them any level of well drilling or extraction activity.
Should a county fail to implement the fee by April 13, there is a fallback: action by municipalities. If a majority of the municipalities within the county or municipalities representing 50 percent of the county’s population all pass the same ordinance imposing the fee by June 13, 2012, the county would not lose its share of the revenues raised.