Counties' shale fees could be delayed
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HARRISBURG -- Counties in the state's gas drilling region shouldn't start counting their impact fee riches just yet -- they may be waiting a little longer than they thought for those dollars.
An analysis of the latest Department of Environmental Protection data shows that there were about 1,650 Marcellus Shale wells producing in Pennsylvania as of June 30.
That's a little more than half the minimum 3,000 wells that will be needed to rake in the $120 million that Gov. Tom Corbett estimates his proposed impact fee would raise in its first year.
The governor's energy executive, Patrick Henderson, points out that there will be plenty of time to get those additional wells into action as counties debate and vote on their individual fees.
Under the current version of the plan, they would have to pass their fee-related rules by March 1 in order to collect money next year.
With legislation still being negotiated, that gives little time for counties to enact their ordinances.
Unless that spring collection date is changed, counties might not be able to receive shale fee revenues until 2013.
"Obviously [the] timing of passage of legislation and accompanying ordinances affect this," Mr. Henderson said.
That timeline could potentially require local officials seeking additional funds to wait another year for new revenue, compared to current plans from Senate President Pro Tem Joe Scarnati and others that would begin distributing dollars early next year.
"We're very cognizant of when it starts and when the first distributions are going to be," said Drew Crompton, chief of staff to Mr. Scarnati, R-Jefferson. "The effective date is something that's going to continue to be re-examined."
The County Commissioners Association of Pennsylvania has expressed support for the bulk of Mr. Corbett's plan, although it voiced some reservations that counties will be pressured to craft a lower fee than their neighbors or none at all.
The organization's director, Doug Hill, said Wednesday that they will be closely watching what the eventual effective date is. One option, he said, would be to have a later collection date during the first year to allow time for passing the local rules.
"It's a good point, but something that could be malleable," Mr. Hill said.
The administration already is considering altering that date.
Mr. Henderson said it may change the March 1 collection date to April 1 to give counties and operators more time after the new production reports are available in mid-February.
"Suffice to say we are committed to doing so in as expeditious a manner possible," he wrote.
Under Mr. Corbett's proposal, counties could decide to charge an initial fee of up to $40,000 per well. All active wells, regardless of age, would be liable for paying that fee.
If all 26 counties with gas-producing shale wells collect that maximum levy, it would take 3,000 wells to reach the governor's revenue estimate. The 1,643 wells listed in the summer report would raise about $65.7 million.
More than 7,500 Marcellus permits were listed on the summer report, and about 3,700 shale wells have been drilled.
"We expect the number coming online to go up exponentially as pipeline projects are completed," Mr. Henderson wrote.
Washington County had the most producing Marcellus wells as of the summer production report, with 274. It was followed by Bradford with 241, Greene's 234, and 212 in Tioga.
Allegheny County was listed with three producing wells, all in Fawn.
With the state's production reports being a newer requirement, there's little data showing the rise in number of producing wells. A look at the past two Marcellus-only reports shows an average of 400 additional wells added to the production list each six months.
The Corbett administration says it believes an increase of 1,500 shale wells annually is a safe assumption. Robert Watson, an associate professor emeritus at Penn State University and co-author of several industry-commissioned economic reports, agreed that 3,000 wells likely could be expected by the end of 2012.
He did caution that the state is in competition with Ohio and other shale formations for resources, with slow pipeline projects, bad weather and low gas prices all potential factors that could slow growth.
Those are important economic factors to keep in mind, Mr. Henderson said, but from a broader perspective than just how they'll affect a fee's bottom line.
"Obviously revenue estimates will vary depending on the exact number of wells in production," he wrote. "Given that we are not shooting for a specific revenue target -- as say, other proposals are -- it's less of a concern."
First Published October 13, 2011 12:00 am