CPI Adjustment To Pennsylvania’s 2014 Unconventional Gas Well Impact Fees
February 11, 2015
2014 marks the first time that the Pennsylvania Public Utility Commission has made a Consumer Price Index (CPI) adjustment to the base price of the Unconventional Gas Well Impact Fee. The Impact Fees for 2014 are:
|
Pennsylvania 2014 Unconventional Gas Well Impact Fees[1] |
||
|
Year of Operation |
Horizontal Well |
Vertical Well |
|
1st Year |
$50,300 |
$10,100 |
|
2nd Year |
$40,200 |
$8,000 |
|
3rd Year |
$30,200 |
$6,000 |
|
4th Year |
$20,100 |
$4,000 |
Why The CPI Adjustment For 2014?
Section 2302(c) of Pennsylvania’s Unconventional Gas Well Impact Fee Act requires an annual adjustment to the Impact Fee if more wells were spud (begun) in the current year (2014) than the prior calendar year (2013). See 58 Pa. C.S. § 2302(c). That adjustment was triggered for 2014: There were 1,372 unconventional gas wells spud in 2014 and 1,207 unconventional gas wells spud in 2013. The adjustment was based on the 2014 United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U) in PA, DE, NJ and MD of 0.6%. That CPI was applied to the base price of the Impact Fee for calendar year 2014, rounded to the nearest $100.
How Was The Base Fee Determined For 2014?
The base Impact Fee is based on Sections 2302(b) of that Act. 58 Pa. C.S. § 2302(b). That Section provides a detailed description of how the Impact Fee is calculated based on factors including: when the well was spud, the number of years the well has been subject to the impact fee and the average annual price of natural gas. For example, the base Impact Fee for a well spud in 2014 (when the NYMEX average annual price of natural gas was $4.415) is $50.000.
Why Don’t I Remember Other CPI Adjustments ?
The CPI adjustment was not applicable in 2013 or 2012 because the number of wells spud declined between those years (2011 to 2012 and 2012 to 2013). The following table shows the number of wells spud, and the applicable Impact Fees for the prior years.
|
Year[1] |
2013 |
2012 |
2011 |
|||
|
Wells Spud |
1,205 |
1,347 |
4,920* |
|||
|
NYMEX (Ave. Annual) |
$3.652 |
$2.789 |
$4.042 |
|||
|
Year of Operation |
Horizontal Well |
Vertical Well |
Horizontal Well |
Vertical Well |
Horizontal Well |
Vertical Well |
|
1st Year |
$50,000 |
$10,000 |
$45,000 |
$9,000 |
$50,000 |
$10,000 |
|
2nd Year |
$40,000 |
$8,000 |
$35,000 |
$7,000 |
—- |
—- |
|
3rd Year |
$30,000 |
$6,000 |
—- |
—- |
—- |
—- |
|
4th Year |
—- |
—- |
—- |
—- |
—- |
—- |
* All unconventional wells spud in calendar year 2011 or before 2011 were treated as if they were spud in calendar year 2011.
Producers are required to annually submit payment of the Impact Fee to the Commission on or before April 1. If you have any questions on the Impact Fee, please contact Carl Shultz at (717)255-3742 – cshultz@eckertseamans.com – or Dan Clearfield at (717) 237-7173 – dclearfield@eckertseamans.com.
[1] Sources: Producer Fees for Calendar Year 2013, 44 Pa. B. 569, 757 (February 1, 2014); Unconventional Gas Well Impact Fee; Producer Fees for Calendar Year 2012, 43 Pa. B. 793, 944 (February 9, 2013); Implementation of Unconventional Gas Well Impact Fee Act, 42 Pa. Bull. 4837, 4996 (August 4, 2012)
This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.