Westmoreland County towns get less money from shale drilling this year

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Westmoreland County and most of its municipalities received less in impact fees from Marcellus Shale gas wells this year than they did in 2012, but the fees are helping local officials keep property tax rates stable.

A year ago, the state distributed the first allocations from the new gas impact fees, and Westmoreland County received about $2 million, based on 135 wells in the county. 

This year, the county will receive about $1.6 million, according to Commissioner Ted Kopas. The county recently passed its 2014 budget without a tax increase with the help of a healthy surplus reserve fund.

The reasons for the decline in the impact fees for most local governments are a combination of lower prices for natural gas, fewer new wells being drilled and the reduced fees paid by gas companies each year a well is in operation.

Under state Act 13, signed by Gov. Tom Corbett in February 2012, gas companies pay the state an annual well fee that is based on the average price of gas that year.

In 2012, companies paid $50,000 for each well in operation in 2011. The fee per well declines each year the well is in operation by $5,000 to $10,000, depending on the price of gas.

Pennsylvania collects about $200 million from the gas fees a year, and municipalities’ share of the fees is based on the number of wells in the community, population and miles of roads. 

 A spokesman for the state Public Utility Commission recently said gas prices on average in the state are 45 percent lower than in 2008 because of the increased supply from Marcellus Shale wells and the reliability of that source.

Westmoreland County has used its gas fees to maintain county roads and bridges as well as to update emergency radio dispatching equipment.

Municipalities in the county that have a large number of gas wells receive as much as $200,000 to $400,000 annually from the fees. Townships, which generally have more open land for wells, receive the most.

Derry Township in the eastern portion of the county collected the most in gas fees in 2012 of any Westmoreland municipality.

It received $458,000 in December 2012. This year it received about $370,000.

WPX Energy of Tulsa, Okla., has drilled nearly 60 wells in the township, according to Derry Supervisor Vince DeCario.

“They have about 20 well pads in the township now,” he said. "Pads are maybe 5 acres and they can drill three, four or five wells on a pad. They are drilling one well right now on an adjacent property just behind our township building. They started about a month ago and are supposed to be finished in January.”

The township building is on Route 982, about 5 miles south of Route 22.

Derry Township is a large, rural community with a population of 14,500, and there have been few problems with the drilling, Mr. DeCario said.

“The fees have helped us a lot,” he said. The township has an annual budget of about $3 million.

But he was quick to disagree with the state’s decision not to tax companies’ gas production directly and instead charge a yearly well fee that declines each year.

“Texas taxes these wells at 7.5 percent of what is produced,” he said. “In Pennsylvania, our impact fees come out to the equivalent of a 1.5 percent tax.

“As these wells get older, we get less in impact fees, and a well can produce gas for maybe 20 to 25 years. After 15 years, we get nothing. I saw a candidate running for governor of Pennsylvania next year who said that if we had a 5 percent tax, we’d get $13 billion over 10 years.”

Derry supervisors have spent about $250,000 from the first year’s fee allocation on roads and bridges.

“We replaced a deteriorating box culvert along Bradenville School Road with the money,” Mr. DeCario said. “We had to close the road in spring, but the project is almost completed. It still needs guiderails, and we’ll spend more than $200,000 on that.”

He said supervisors will meet in January to discuss how to spend this year’s impact fees. He said they will consider a number of road and bridge projects and equipment.

He said the township has no pending requests for permits to drill wells.

Washington Township in the northern section of the county was another of the top grossing municipalities for gas fees.

It received $378,000 last year, with 39 wells in the township, according to officials. This year, it received $260,000, and had 36 wells in operation.

“It’s helped us immensely,” Supervisor Joe Olszewski said. “It has allowed us to do a lot more, and Consol Energy has been good to work with. They’ve taken care of any problems."

He said the township is using $150,000 to purchase a dump truck, but the bulk of the fees will go to paving roads.

“We spent $800,000 this year on paving. We have 37 miles of roads and we paved 8 miles,” he said.

He said supervisors would amend their 2014 budget of $2.6 million when they get their gas fee allocation from the state in July.

But drilling of new wells in the township has slowed.

“Consol Energy has permits for five to seven wells that they haven’t drilled yet,” he said.

South Huntingdon, according to the PUC, received $260,000 last year for 26 wells in 2011 and $218,000 this year for 29 wells.

Sewickley Township is the exception among county municipalities. The amount it received in gas fees went up this year, in large part because more wells were drilled in 2012. The gas fee that a municipality receives from the state is based on the number of wells in the previous year.

Last December, Sewickley Township received $141,000, according to township office manager Paula Alcott. That was based on 13 wells in the township for 2011, according to the PUC. In July of this year, the township received an allocation of $237,000, based on 32 wells in 2012. Ms. Alcott said no new wells were drilled in 2013 in the township.

She said supervisors have placed most of the fees in reserve but have bought 11 defibrillators for $18,000 to be placed in the fire departments and in the township building.

Royalties from local gas wells have helped keep water rates stable for many county customers as well.

More than 30 gas wells have been drilled on property owned by the Municipal Authority of Westmoreland County. The authority has received more than $5 million in gas royalties this year, more than expected.

Debra Duncan, freelance writer: suburbanliving@post-gazette.com.

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