Pa. communities brace for gas well income dip

Gas wells near State Game Land 117 in Washington County on Friday, Nov. 27, 2015.
Gas wells near State Game Land 117 in Washington County on Friday, Nov. 27, 2015.
Photo by Sidney Davis | Trib Total Media
David Conti
| Friday, Jan. 29, 2016, 11:00 p.m.

Leaders of some Pennsylvania communities accustomed to collecting big annual payments from impact fees assessed on shale gas wells are preparing to see less money this year.

Lower natural gas prices in 2015 triggered a provision in state law that reduced the fee gas companies will pay this year by $5,000 per shale well, according to a notice the state Public Utility Commission published Friday. A new, horizontal shale well will generate a fee of $45,300. Fees go down with older wells and are lower for vertical wells.

The commission has yet to calculate total fees or determine how much each county, community and state program funded by them will receive. But the total collected will likely be lower than last year's $223.5 million because depressed gas prices — which dipped to 16-year lows in December — caused companies to drill 40 percent fewer wells last year.

“We saw this coming. We knew there would be less fees coming back,” said Larry Maggi, Democratic chair of the Washington County commissioners. The third-highest shale gas producing county in the state behind Susquehanna and Bradford, Washington last year received $6.5 million in fees, and its townships and boroughs collected another $11 million in total.

“We try not to anticipate that money,” Maggi said. “We don't use it to hire people, or for pay raises. So we don't have to reduce anything or services or projects.”

The PUC will calculate individual disbursements before sending out checks by July 1.

The state uses a series of formulas to divide the large pot of collections from gas companies among communities that host wells and neighboring towns, counties, programs that award environmental grants, and state agencies. The amount each community receives varies with proximity to wells and the age of those wells.

The state has collected the fee under Act 13 of 2012 as part of a political compromise that avoided imposing a severance tax based on the price or amount of gas a well produces. Gov. Tom Wolf has pushed for a severance tax since being elected in 2014.

Communities have leeway in spending their money but are encouraged not to budget it for necessities. The money has been a windfall for some rural townships that struggled to pay for sewer improvements or fire trucks.

“These little townships, they depend on that money,” said Richard Gates, a supervisor in rural South Huntingdon in Westmoreland County.

The township received $210,670 last year, helping with the cost of a one-ton dump truck and a Dodge Ram it uses for snow removal and hauling items.

“We've been using it for road projects and buying equipment,” Gates said.

Westmoreland County anticipates getting about $500,000 less than the $2.1 million it received last year, said Meghan McCandless, director of financial administration. Last year's money went to bridges, public safety and the conservation district, she said.

“I don't believe anything until we get the check in our hands,” said Republican county Commissioner Charles Anderson.

Donald Lachman, vice chair of the Board of Supervisors and roadmaster of Buffalo in Washington County, said the township hesitates to expect a certain amount from the state each year as the amount varies with prices and other factors.

“We're glad that we get what we get,” said Lachman, whose township got nearly $239,000 last year. “It's pretty hard to try to count on ‘X' number of dollars each year.”

Severance tax advocates have argued that assessing wells based on how much they produce would generate more money for schools and other state programs. The low prices that triggered the reduced impact fees, though, would lead to less tax money collected.

“I think it will lessen the chances of getting a severance tax,” Maggi said, noting the reduced drilling activity by companies.

Staff writers Aaron Aupperlee and Joe Napsha contributed to this report. David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or dconti@tribweb.com.

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