State Supreme Court reimposes impact fee on frackers

By Tomas Kassahun | Jan 11, 2019

PITTSBURGH - The Supreme Court of Pennsylvania has reversed a Commonwealth Court order, imposing a yearly impact fee on producers of natural gas from certain vertical wells.

According to the ruling on Dec. 28, the fee is imposed on vertical wells that apply fracking to extract natural gas. The judges said the impact fee will be imposed on such wells if their production exceeds 90,000 cubic feet of natural gas per day for one month of the year, as determined by the Public Utility Commission.

“We reverse the Commonwealth Court’s order, which had reversed the PUC, and we reinstate the PUC’s order,” the opinion stated.

The Supreme Court said appellee, Snyder Brothers Inc., drilled and operated a number of unconventional vertical wells in Pennsylvania from 2011-12.

“After reviewing SBI’s annual well production reports for calendar years 2011 and 2012, the PUC’s Bureau of Investigation and Enforcement determined that SBI had failed to properly identify on those reports 45 wells as ‘vertical gas wells’ and that SBI failed to remit the requisite impact fees to the PUC for them,” the opinion stated.

A vertical well is a well in which a bore hole is drilled vertically downwards from a point on the land surface until it enters the top of a reservoir of natural gas pooled within an unconventional formation. 

The Supreme Court said a producer of natural gas from a vertical well must pay an impact fee if the well meets Act 13’s definition of a vertical gas well — “an unconventional gas well which utilizes hydraulic fracture treatment through a single vertical well bore and produces natural gas in quantities greater than that of a stripper well.”

A stripper well is defined as “an unconventional gas well incapable of producing more than 90,000 cubic feet of gas per day during any calendar month,” according to the Supreme Court. 

“Producers from unconventional wells are responsible under Section 2303 of Act 13 for self-reporting the amount of a well’s production for each calendar year and are obligated to remit any impact fees they owe to the PUC, along with a $50 per-well administrative fee,” the opinion stated. 

The PUC argues the Commonwealth Court erred by finding that the definition of stripper well was clear and unambiguous, the Supreme Court said.

“Despite the parties’ and the Commonwealth Court’s primary focus in their arguments on the proper interpretation of the definition of ‘stripper well’ in Section 2301, it is not that definition, standing alone, which is dispositive of the central question in this case,” the Supreme Court said.

According to the opinion, the key question is to analyze the meaning of the word “any” in the definition. The Supreme Court said “any” could mean “‘all’ or it can mean “one.”

“If a statutory term, when read in context with the overall statutory framework in which it appears, has at least two reasonable interpretations, then the term is ambiguous,” the opinion stated. 

According to the opinion, an interpretation of “any calendar month” in the definition of a stripper well relieves producers of the obligation to pay the fee only if their well or wells produce 90,000 cubic feet per day or less of natural gas for each and every calendar month of the year. 

The Supreme Court concluded that it supports the legislature which intends for an impact fee to be “due and payable whenever any unconventional gas well produces more than 90,000 cubic feet per day of natural gas for even one month of a calendar year.” 

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