PUC Intends To Appeal A Court Ruling Jeopardizing Act 13 Drilling Impact Fee Collections

Public Utility Commission Chairman Gladys Brown notified Gov. Tom Wolf in a letter Tuesday the Commission intends to appeal a March Commonwealth Court decision that it believes “significantly jeopardized the current and future fees generated by Act 13 drilling impact fees.

This year alone, Brown said, the decision would reduce the already declining revenue from the impact by $16 million or approximately 10 percent of the total collection.  

The Independent Fiscal Office estimated in January the impact fee would generate $13.1 million less for calendar year 2016 compared to the previous year-- $174.6 million.  That’s down $61.2 million from its high in 2013 of $225.7 million-- a 27 percent reduction.

“The Commission expects this reduction to increase in future years given the age/production level of wells and the producers’ ability to fully take advantage of the Court’s interpretation,” Brown said.

The Court decision in Snyder Brothers, Inc. v. PUC dealt with a provision in Act 13 that provided an exemption from the impact fee for so-called “stripper wells.”  These are wells the law defines as incapable of producing more than 90,000 cubic feet of gas per day during any calendar month.

The PUC consistently held that a well is not a stripper well and is subject to the impact fee if it exceeds minimum production levels in one calendar month in a year, but Commonwealth Court held otherwise saying wells had to pay the impact fee only if a well exceeds the minimum production levels in every month in a year.

Brown said the Commission’s interpretation was based on examination of prior legislative versions of Act 13 which explicitly required production levels be met in every month of a year for the impact fee to apply, the purpose of Act 13 to provide relief to municipalities affected by drilling and other provisions in Act 13 which clarify the impact fee applies if a well meets specified production levels in one month in a year.

“The Court’s interpretation may lead to unreasonable results.  For instance, if well “A” produces 100,000 [cubic feet] per day/month for 12 months, it pays the fee.  If well “B” produces 200,000 [cubic feet] per day/month for 11 months, falling short in one month, it does not pay the fee.”

This unreasonable result, said Brown, was noted by the dissenting opinion in Snyder Bros which said the General Assembly does not intend a result that is absurd, impossible of execution, or unreasonable.

“Because the Commission believes that the Court’s decision is not in accord with the statute nor the intention of the General Assembly, the Commission will file a Petition with the Supreme Court for allowance of appeal.

“However, that process is time consuming and uncertain.  To the extent appropriate, a legislative solution may provide the clarity required.  A possible legislative solution to clarify the intention of the General Assembly would be to change the word “any” to “every” in Act 13’s definition of stripper well.”
A copy of Chairman Brown’s letter is available online.

Gov. Wolf Urges Fix

In response to the PUC’s letter, Gov. Wolf issued this statement-- “As a result of the recent court decision, counties and municipalities across the state which receive impact fee revenues to address critical infrastructure needs and impacts of natural gas development will receive millions less this year and in future years. The Governor believes that the language should be fixed to ensure that counties and municipalities receive the funding they depend on.”
NewsClips:
Legere: Stripper Well Ruling Could Cause $16 Million Drop In Drilling Impact Fees
Wolf Says Act 13 Language Should Be Fixed To Protect Impact Fee Revenue