Governor Tom Corbett announced on Friday that the state of Pennsylvania expects to collect $224.5 million in 2014 through Act 13’s well fee assessed on unconventional wells. This figure represents an 11% increase over the previous year. Since Act 13 became law in 2012, the total amount collected from the fee accounts for more than $630 million in revenue.
The majority of the Act 13 well fee funds are directly distributed to counties and municipalities for a variety of authorized uses. A portion of the funds are also distributed to commonwealth agencies such as the DEP and conservation programs like Growing Greener and Marcellus Legacy Fund.
Act 13 imposes a 15 year fee for companies drilling into the Marcellus Shale formation. The annual fees can range between $5,000 to $60,000 per well, depending on the current price of natural gas and the age of the well.
NPR’s StateImpact Pennsylvania reports that the Pennsylvania Farm Bureau is getting involved in the debate over minimum royalties. As we have previously posted, House Bill 1684 is currently in the state House. If passed, the bill would guarantee landowners a minimum royalty of 12.5%, which could not be reduced further by post-production costs. The Farm Bureau is putting its support behind the bill, as indicated by remarks from the Farm Bureau’s President, Carl Shaffer.
This week the Pennsylvania Department of Environmental Protection (PADEP) announced the availability of emissions data from oil and gas operations in the Commonwealth. According to the PADEP press release, the data represents “2012 emissions levels from Marcellus Shale natural gas production and processing operations as well as compressor stations that receive gas from traditional oil and gas well sites.” PADEP reportedly received data from “56 Marcellus Shale operators covering 8,800 natural gas wells and 70 operators of 400 compressor stations.” Air contamination sources in the industry report emissions annually to PADEP.
TransCanada Corporation’s ANR Pipeline system has secured nearly 2.0 billion cubic feet per day of natural gas transportation commitments for the movement of oil and gas produced from the Utica and Marcellus formations through its Southeast Main Line. These contracts involve transporting natural gas to points both north and south within ANR’s system, as well as increasing their flow capability to the Gulf Coast. ANR is one of the few existing pipeline systems with access to both the Upper Midwest and the Gulf Coast, and they are exploring further opportunities to transport gas produced from the Utica Shale to these areas.
The Pittsburgh Business Times reports that the Beaver County Board of Commissioners and representatives from Royal Dutch Shell met to discuss the next planning steps for the proposed cracker plant in Beaver County, Pennsylvania. Although the meeting did not result in a final decision as to whether the company will build the plant, the commissioners and representatives discussed relocating a portion of a highway, power lines, a rail line and developing a dock. Shell began demolition activities at the former Horsehead site in February. It has also begun to secure feedstock supply for the plant by securing agreements with CNX Gas Co. LLC, Hilcorp Energy Co., Noble Energy Inc. and Seneca Resources Corp.
The Pittsburgh Business Times reports that Allegheny County has reached a deal with Range Resources and Huntley & Huntley as to leasing the oil and gas under Deer Lakes Park in Allegheny County, Pennsylvania. Allegheny County Executive Rich Fitzgerald announced the county will receive $4.7 million in bonus payments, $3 million for the Park Improvement Fund, and a 18% royalty. He also announced that operations in Deer Lake Park are prohibited by the terms of the lease. The deal must be approved by Allegheny County Council.
As reported by Pittsburgh’s NPR News Station, 90.5 WESA, three advocacy groups, Leaders of Policy Matters Ohio, the Pennsylvania Budget and Policy Center, and the West Virginia Center on Budget & Policy, sent a letter to the governors of Ohio, Pennsylvania and West Virginia requesting a common severance tax for oil and gas production in all three states. These advocacy groups suggest that the purpose of a common severance tax would be to provide consistency in the industry allowing each state to similarly benefit from the economic opportunities created by oil and gas production. The letter asserts that a common policy would provide long-term predictability and take taxing out of the competitive equation between the states. The letter recommends that West Virginia’s severance tax should be set as a minimum rate, as it is in the middle range of taxes in gas-producing states.
The Times Leader reports that natural gas produced within Pennsylvania from the Marcellus Shale exceeded 3 trillion cubic feet in 2013. This total exceeds the production total from 2012. According to the report, the U.S. Department of Energy estimates that the Marcellus Shale provides about 18 percent of the nation’s natural gas.
On January 27th, 2014, the Commonwealth Court of Pennsylvania overruled in part and sustained in part the preliminary objections of Seneca Resources Corporation (Seneca) to a complaint filed by the Pennsylvania Game Commission (Commission). The Commission requested injunctive and declaratory relief against Seneca relative to the development of oil and gas under State Game Lands 39 in Venango County, Pennsylvania. The controversy stemmed from the interpretation of two severance deeds. A 1928 deed to the Commission excepted and reserved “all the oil and gas in or under the herein[-]described lands, with the right to operator for same by ordinary means now in use” (emphasis added). A 1932 deed excepted and reserved “all petroleum and oil and natural gas together with the right to prospect for, drill and bore for, produce and remove the same.” Seneca is the owner of the oil and gas rights that were excepted and reserved from the two deeds. Although the Commission conceded that Seneca acquired the oil and gas, it maintained that it owns the development rights to extract the oil and gas by “modern means” since horizontal drilling and hydrofracturing were not available practices at the time of the severance, and therefore, the parties could not have contemplated such practices as “ordinary means now in use.” With regard to the 1932 deed, the Court held that there were no limitations on the manner of extraction. With regard to the 1928 deed, the Court stated that the language was ambiguous with regard to whether “modern” extraction methods were prohibited and that the litigation would proceed to determine that claim.
Kevin Haggerty, a Democratic state representative from the northeast region of Pennsylvania, recently introduced House Bill 1947 to impose a 5% severance tax on the gross value of each unit severed, plus an additional 4.6 cents per unit. “Unit” is defined to mean a thousand cubic feet of natural gas measured at the well head. Unlike previous severance tax proposals that would spread the tax dollars across various programs and beneficiaries, this bill seeks to use the tax proceeds solely to benefit Pennsylvania’s transportation system via the Motor License Fund.
The Pennsylvania Department of Environmental Protection (DEP) recently published on its website a series of video training tutorials to provide guidance on how to complete quarterly well inspections under the Mechanical Integrity Assessment (MIA) requirements. MIA forms, instructions and user guides are also available on DEP’s website.
DEP also recently published a Frequently Asked Questions (FAQ) document addressing the Bureau of Air Quality’s General Permit-5 (GP-5) and Plan Approval Exemption Category No. 38. The GP-5 is a General Plan Approval and/or Operating Permit used to permit emissions from natural gas gathering, compression and/or processing facilities that are minor air contamination facilities, while Exemption Category No. 38 concerns a permit exemption for air emission sources located at a well pad.
The Pittsburgh Post-Gazette reports that Pennsylvania Governor Tom Corbett has requested that oil and gas operators continue to help protect the rivers, streams and wetlands by adhering to environmental standards, including setback provisions, that were recently struck down by the Pennsylvania Supreme Court. According to Governor Corbett’s press release, the setback provisions had required a minimum of 300 feet between an unconventional oil or gas well bore and a stream, spring, body of water or wetland (or 100 feet for a conventional well). The distance provisions could only be waived by the Department of Environmental Protection upon satisfactory demonstration of additional protective measures taken by an operator to ensure that water quality was fully protected. The Marcellus Shale Coalition, the Associated Petroleum Industries of Pennsylvania and the Pennsylvania Independent Oil and Gas Association have indicated that they will comply with Governor Corbett’s request.
As reported in December, the Pennsylvania Supreme Court on December 19, 2013 invalidated portions of Act 13, including provisions limiting local government control and provisions regarding setbacks from the waters of the Commonwealth, pursuant to Article 1, Section 27 of the Pennsylvania Constitution.
However, the Pennsylvania Office of General Counsel (OGC) today filed an Application for Reconsideration requesting that the Pennsylvania Supreme Court remand the case to the Commonwealth Court so that a hearing can be held to create a factual record because the Supreme Court’s decision relied upon broad factual findings that were not of record before any court. Second, the OGC requested that the Supreme Court remand to the Commonwealth Court the issues related to setbacks from waters of the Commonwealth.
The Pittsburgh Post-Gazette recently reported that Horsehead Corp. and Shell Chemical LP have extended their land option agreement for a third time, giving Shell more time to decide whether it will build an ethane cracker on the site of Horsehead’s Beaver County Pennsylvania smelter. Unlike the previous two extensions, the expiration date of the third extension is confidential. The third extension also includes a provision that Horsehead will soon begin demolition activities at the site and that Shell will cover the expenses. Horsehead and Shell first entered into a land option agreement in March 2012.
On December 14, 2013, the Pennsylvania Environmental Quality Board (EQB) amended the Title V annual emission fee assessed by the Department of Environmental Protection (DEP)’s Bureau of Air Quality, increasing the fee to $85 per ton of “regulated pollutant,” for up to 4,000 tons of emissions. This represents an increase of $27.50 per ton of emissions, moving from the existing rate of $57.50 per ton. Citing DEP budget deficit problems, the EQB described this $27.50 increase as “a bridge to allow additional time for the development of a comprehensive fee structure for the air quality program.” The annual Title V emission fee requirement affects owners and operators of facilities that are classified as major sources of air pollution under Section 501 of the Federal Clean Air Act and subject to the Title V permitting program. The increased rate will affect Title V fees payable by September 1, 2014, for emissions occurring in calendar year 2013.