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Drop in natural gas prices hits state's drilling fee revenue

| Wednesday, April 3, 2013, 10:45 a.m.

Pennsylvania's drilling fee revenue is dropping by about 3 percent, below $200 million, as lower gas prices triggered lower fees that deep-shale drillers must pay to the state.

State officials expect to collect about $198 million in per-well fees that lawmakers approved last year to cover road work, conservation, housing and other costs from drilling's impact. That's down about $6 million from last year, according to data the Public Utility Commission put on its website Wednesday.

In the new oil and gas law known as Act 13, state lawmakers tied the fee to the price of gas, leading the PUC to lower the fee for each well in 2012 by about $5,000. The annual average natural gas price dropped by a third from 2011 to 2012, down to $2.78 per thousand cubic feet, according to the commission's calculations. The owners of horizontal wells drilling in 2012 had to pay $45,000 for each, and the owners of older wells had to pay $35,000 for each.

“The drilling is still robust in the western part of Pennsylvania, and has tapered off somewhat in the other regions. ... I would not be extremely concerned if I was in Western Pennsylvania,” said state Rep. Brian Ellis, R-Butler County, the legislation's sponsor. “We set up the fee exactly for that reason: If there's drilling in your area ... you'll have a revenue source to handle it.”

Some communities are concerned about the decline in fees. Westmoreland County, and just about every area east of Pittsburgh saw a decline in drilling in 2012, which means their funding may go down.

“First of all, I didn't agree with Act 13 from the beginning,” said Vince DeCario, supervisor chairman in Derry Township, which allocated its $458,000 last year all for road and bridge repairs. “I didn't think it was fair, and this is one of the reasons. The price of gas goes down, and the fee goes down ... but the impact is the same.”

This is the second year of the unconventional drilling impact fee, and the first time it was due by April 1. The money is divided based on a formula in the law that first feeds set amounts to some state agencies. Most of the rest goes to municipal and county governments, largely based on where drilling is happening.

PUC has until July 1 to send out that money, but officials are not exactly sure when they'll finish doing calculations on how much each recipient gets, commission spokeswoman Jennifer Kocher said. Even though the money has dropped statewide, some communities that haven't seen a drop in drilling could still get the same amount or more money, depending on the number of wells near them.

Gas companies drilled 1,357 new deep-shale wells in Pennsylvania last year, Kocher said. Nearly all of those were horizontal and got charged a full fee of $45,000 each. There were 4,920 deep-shale wells drilled before 2012, which had to pay the lesser fee. There were 288 vertical deep-shale wells, whose owners have to pay only a fifth of what horizontal drillers paid, under the law.

The state had about $9 million of drilling money unaccounted for.

EXCO Resources PA LLC failed to pay about $4.9 million, PUC data shows. The commission electronically sent an invoice to an EXCO employee who had left the company, which did wire the payment to the state on Wednesday, said Heather Lamparter, the company's vice president of legal. The company, a joint venture led by EXCO Resources Inc. in Dallas, had recent layoffs at its Marshall office.

“We took all due course to correct it as quickly as possible,” Lamparter said. “EXCO values its relationship with Pennsylvania agencies and remains committed to complying with all applicable regulations.”

PUC data initially showed that Atlas Resources LLC had $2.2 million in fees missing. The commission confirmed late Wednesday it received the payment on time. Parent company Atlas Energy LP in Findlay had a receipt dated March 29, spokesman Brian Begley said.

“As is sometimes ordinary with these things, there's a bit of a lag there,” Begley said. “We're trying to make it clear to them that they should have this data correct before they publish it.”

Some other payments may be on the way, too, Kocher said. The commission accepts payments as on time as long as they're postmarked by the April 1 deadline, she said.

Total expected collections could still rise, too, but commission officials are not sure by how much. Some wells are in dispute and could later be classified as unconventional under the state's new oil and gas laws, Kocher said. She did not know how many were still in limbo.

The state collected 2011's fees in September, seven months after the fee became law. Starting this year, fee money is due April 1, according to the commission.

Timothy Puko is a staff writer for Trib Total Media. He can be reached at 412-320-7991 or

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