PA Supreme Court Takes a Close Look at Strippers…as in Wells

It’s always fun to talk about strippers here on MDN. Uh, stripper wells that is. Background: In 2012 Pennsylvania passed the Act 13 drilling law that includes an impact fee on wells targeting shale layers, including the Marcellus. Snyder Brothers, headquartered in PA, drills mostly conventional (vertical only) wells in southwestern PA. In 2011-2012 they drilled 45 vertical-only wells targeting the Marcellus. All 45 of the vertical-only wells were fracked. Initially those wells produced more than 90 thousand cubic feet per day (Mcf/day), but by December of the year in which they were drilled, the wells produced less than 90 Mcf/day. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/day during “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf/day, arguing the word “any” is not a get-out-tax-jail-free card. Snyder Bros. sued and after an appeal of the case, Snyder Bros. won the case in March 2017, exempting those wells from paying impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). That sent the state Public Utility Commission (PUC) into a tizzy with claims the Act 13 impact fees are now in jeopardy. So the PUC appealed the case to the PA Supreme Court. The Supremes heard arguments in the case last Wednesday…
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PA Strippers Back in News, Supremes to Hear Synder Bros Case

The Pennsylvania Supreme Court said last week it will accept a case about strippers–stripper wells, that is. In brief, in 2012 Pennsylvania passed the Act 13 drilling law that includes a fee on wells targeting shale layers, including the Marcellus. Snyder Brothers, headquartered in Kittanning, PA, drills mostly conventional (vertical only) wells in southwestern PA. In 2011-2012 they drilled 45 vertical-only wells, but targeting the Marcellus, all of the wells fracked. Initially those wells produced more than 90 Mcf/day, but by December of the year they were drilled, they produced less than 90 Mcf/day. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/day during “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf/day. Snyder Bros. sued and after an appeal of the case, Snyder Bros. won their case in March, exempting those wells from paying impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). That sent the state Public Utility Commission (PUC) into a tizzy with claims the Act 13 impact fees are now in jeopardy. The PUC is not letting it alone. They conscripted a sympathetic ally in the PA legislature to introduce a bill to “fix” the “loophole” (see PA Lib Dem Introducing Bill to “Fix” Strippers Once and for All). At the same time the PUC kept pushing on the legal front, and last week the PA Supremes agreed to hear an appeal of the case. Looks like those strippers just won’t go away…
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New PA Bill an Overreaction to Court Ruling on Strippers

As previously reported, liberal Pennsylvania House of Representatives Democrat Pam Synder has now introduced a bill (HB 1283, copy below) to “clear up” what the state Public Utility Commission (PUC) is a loophole in the Act 13 law that may allow some drillers to avoid paying impact fees (i.e. drilling taxes) on some Marcellus Shale wells (see PA Lib Dem Introducing Bill to “Fix” Strippers Once and for All). In 2012 Pennsylvania passed the Act 13 law that includes a fee on wells targeting shale layers, including the Marcellus. Snyder Brothers, headquartered in Kittanning, PA, drills mostly conventional (vertical only) wells in southwestern PA. In 2011-2012 they drilled 45 vertical-only wells, targeting the Marcellus–all of the wells fracked. Initially those wells produced more than 90 Mcf/day, but by December of the year they were drilled, they produced less than 90 Mcf/day. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/day during “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf/day. Snyder Bros. sued and after an appeal of the case, won their case in March, exempting those wells from paying impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). That sent the state Public Utility Commission (PUC) into a tizzy. The PUC and the PA Democrat Party is using the court case to try and accomplish two things they haven’t been able to accomplish heretofore: (1) claim this is a prime example of why a nosebleed high severance tax is needed, in this year’s budget, and (2) fundamentally change the intent of the Act 13 law by passing a “clarification” as introduced by Snyder’s HB 1283 bill. Below we explore this issue in depth and tell you why the Snyder case win is NOT a way for drillers to avoid paying impact fees. In fact, the court’s decision makes it clear that drillers cannot simply reduce production for one month and then claim it’s a stripper well under the 90 Mcf/day definition. Snyder’s bill is an overreaction and does not clear up anything. Instead, it changes everything…
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PA Lib Dem Introducing Bill to “Fix” Strippers Once and for All

Pam Snyder

The kerfuffle over strippers in PA continues–stripper wells, that is. In brief, in 2012 Pennsylvania passed the Act 13 law that includes a fee on wells targeting shale layers, including the Marcellus. Snyder Brothers, headquartered in Kittanning, PA, drills mostly conventional (vertical only) wells in southwestern PA. In 2011-2012 they drilled 45 vertical-only wells, but targeting the Marcellus, all of the wells fracked. Initially those wells produced more than 90 Mcf/day, but by December of the year they were drilled, they produced less than 90 Mcf/day. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/day during “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf/day. Snyder Bros. sued and after an appeal of the case, Snyder Bros. won their case in March, exempting those wells from paying impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). That sent the state Public Utility Commission (PUC) into a tizzy. The PUC, under liberal Democrat chairwoman Gladys Brown, is painting nightmare scenarios where impact fee revenue will be in jeopardy (see PA PUC Wants Act 13 Language Changed to Avoid Stripper Abuse). Brown wants the PA legislature to pass a new law amending the Act 13 law to “clear up” the language to say if a well produces more than 90 Mcf/day in ANY month, it qualifies to pay the impact fee. Brown has found a willing accomplice in PA State Rep. Pam Snyder, liberal Democrat representing Greene, Fayette, and Washington Counties. Snyder issued a press release to say she’s about to introduce a bill that Brown wants…
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4 Marcellus Wells Approved in S Buffalo Twp – Concerns Discussed

In 2012 Pennsylvania under then Gov. Tom Corbett passed the Act 13 law, a major revision to PA’s oil and gas laws. Part of Act 13 would have established a uniform set of zoning ordinances, replacing and superseding any such local ordinances. But then seven selfish towns got together and sued to the state to retain the right of imposing their own zoning ordinances for some oil and gas development. The lawsuit was a years-long process with the case ending up at the PA Supreme Court–where the seven selfish towns won the right to impose their own ordinances on o&g development–up to a point (see PA Supreme Court Rules Against State/Drillers in Act 13 Case). Nowadays, PA towns have their own ordinances to deal with issues like truck traffic, noise, lights, setbacks and more. Fine. It is what it is and instead of a consistent set of rules, drillers are faced with a crazy quilt of differing rules across different townships. Snyder Brothers, which has already drilled several Marcellus Shale wells in South Buffalo Township (Armstrong County), wants to drill four more Marcellus wells in the town–next door to their previously drilled wells. So they applied for “conditional use” permits from the town to drill them. Town supervisors granted the permits, but not before conducting a public hearing where residents sounded off about the project. What is interesting about the hearing is that none of the residents opposed the new wells–but they did have some tough questions for Snyder Bros. about lights and noise and water wells. Good questions. Honest questions. Tough questions. And Snyder Bros. answered those questions and made promises/assurances to local residents. This is how a free, open and democratic society works. This is how adults behave. Give and take, back and forth, in a spirit of “let’s do it right the first time so we don’t have problems.” Hats off to the residents and supervisors of South Buffalo Twp, and to Snyder Brothers, for showing the rest of PA (looking at you Peters Twp) how it’s done…
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PA PUC Wants Act 13 Language Changed to Avoid Stripper Abuse

It seems the controversy in Pennsylvania over the Snyder Brothers’ strippers isn’t going to end any time soon. No, not those kinds of strippers, silly! We’re talking about stripper wells, which are defined in PA as wells that produce less than 90 thousand cubic feet (Mcf) for a one month period. Stripper wells are vertical wells that don’t produce nearly as much gas as horizontal shale wells. In 2012 PA passed the Act 13 law that includes a fee on wells targeting shale layers, including the Marcellus. And here’s where it gets a little complicated. Snyder Brothers drills mostly conventional (vertical only) wells. In 2011-2012 they drilled 45 vertical-only wells, but targeting the Marcellus (all of them fracked). Initially those wells produced more than 90 Mcf/month, but by December of the year they were drilled, they produced less than 90 Mcf. The way the 2012 Act 13 law is written, if a well produces less than 90 Mcf/month for “any” month it is considered a stripper well and exempt from paying the impact fee. The state’s Public Utility Commission (PUC) assessed the fee anyway because for 11 months the wells produced more than 90 Mcf. The argument back and forth is whether the intent was “any single month” or not as the trigger to exempt a well from paying the fee. Snyder Brothers went to court and in March, they won, exempting those wells from impact fees (see PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due). Now the PUC is (a) mad, and (b) worried that other drillers may use the court ruling to argue they don’t owe impact fees. So the PUC is doing two things: (1) The PUC appealed the lost case. (2) The PUC is asking Gov. Wolf, and the legislature, to “fix” the language in the original 2012 Act 13 law, to slant it in their favor…
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PA Court Says Snyder Bros Wells are Strippers, No Impact Fees Due

In 2014 MDN brought you the interesting story of strippers in the Marcellus–stripper wells, that is (see High-Priced Strippers in PA: Semantic Gymnastics with Impact Fee). Synder Brothers is an oil/gas producer in Pennsylvania. Most of the wells they drill are vertical-only wells. Among them are 24 wells from 2011 and 21 wells from 2012 that are vertical only–but all targeting the Marcellus. According to the definition of a stripper well under the Act 13 law passed in 2012, a well qualifies as a stripper well if it doesn’t produce over 90 thousand cubic feet (Mcf) of natural gas per day for at least one month. Synder Bros. says although their wells may have produced over 90 Mcf in some months, they didn’t produce that much in at least one month during the years in question. Ergo, their wells qualify as stripper wells and not liable to pay an impact fee. The PA Public Utility Commission (PUC), charged with evaluating what does and does not qualify, said nope–your wells target the Marcellus formation and produced above 90 Mcf for “at least” one month out of the year, therefore must pay the impact fee. So the PUC sued Snyder Bros., intending to collect $500,000 in unpaid fees PLUS a $50,000 fine for inconveniencing the PUC (see PA PUC Sues Snyder Bros to Collect $500K in Unpaid Impact Fees). In January of this year, more than a year after first hearing the case, PA Commonwealth Court wanted to hear it all over again (see High-Priced PA Strippers Go Back to Court, Impact Fee Semantics). The court has finally ruled: the law clearly means if production is less than 90 Mcf in any single month, that well is a stripper. Snyder Bros. doesn’t have to pay the $500K impact fee on those wells…
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Top 20 Marcellus Drillers in Southwest Pennsylvania

The sharp folks over at the Pittsburgh Business Times have been looking through data from the Pennsylvania Department of Environmental Protection (DEP) and have compiled a list of 20 drillers who have at least a dozen shale wells in the southwest PA region. And they ranked them from lowest to highest. We’ve grabbed the list below. The interesting thing for MDN is that there is one name in the list not familiar to us, and we’ve been watching this space since 2009. Always fun to learn something new. Here’s the list of southwest PA’s “Top 20” Marcellus drillers…
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High-Priced PA Strippers Go Back to Court, Impact Fee Semantics

In 2014 we brought you the interesting story of strippers in the Marcellus–stripper wells, that is (see High-Priced Strippers in PA: Semantic Gymnastics with Impact Fee). Synder Brothers is an oil/gas producer in Pennsylvania. Most of the wells they drill are vertical-only wells. Among them are 24 wells from 2011 and 21 wells from 2012 that are vertical only–but all targeting the Marcellus. According to the definition of a stripper well under the Act 13 law passed in 2012, a well qualifies as a stripper well if it doesn’t produce over 90 thousand cubic feet (Mcf) of natural gas per day. Synder Bros. says their wells don’t, ergo their wells are stripper wells and not liable to pay an impact fee. The PA Public Utility Commission (PUC), charged with evaluating what does and does not qualify, says nope–your wells target the Marcellus formation and produced above 90 Mcf for at least one month out of the year, therefore must pay the impact fee. So the PUC sued Snyder Bros., intending to collect $500,000 in unpaid fees PLUS a $50,000 fine for inconveniencing the PUC (see PA PUC Sues Snyder Bros to Collect $500K in Unpaid Impact Fees). Now, more than a year after first hearing the case, PA Commonwealth Court wants to hear it all over again. Can’t enough of those strippers…
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Impact “Fee” or Impact “Tax”? It Matters in this (Court) Case

Is the money collected from drillers in Pennsylvania for wells a fee, or a tax? Under the Act 13 law passed in 2012, it’s called an impact fee. We’ve long made the case that it’s part fee, part tax (see our story from 2012: PA’s New Tax on Drilling (er Sorry, Impact Fee)). Our definition, which we think makes eminent sense, is that a fee is money collected to reimburse the government for a service used. You drill a well in a community, you run big trucks over rural roads–those roads get damaged and it takes money to repair them. Or if there’s an accident because of the increase in traffic and fire/police are called out more frequently–there’s a cost associated. Local towns meeting to review and debate requests related to new wells? Takes precious time, and money. The impact fee, as originally intended, would compensate local municipalities for out-of-pocket expenses they incur when drilling comes to town. But then greedy politicians who like money to flow through their stick fingers got involved and in order to “sell” the impact fee in Harrisburg, compromises were made. In the end, 60% of the money collected from the impact “fee” stays local–to reimburse towns and counties for out-of-pocket expenses. The other 40% goes into the Harrisburg black hole and disappears into the fingers of local and state politicians who don’t incur any expense from drilling. So we call that 40% portion a tax–an obscene one at that. Why does it matter whether it’s considered a tax or a fee? Because of a Commonwealth Court case in which a driller maintains it’s a tax and the company doesn’t owe it if it’s considered a tax…
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PA PUC Sues Snyder Bros to Collect $500K in Unpaid Impact Fees

CORRECTION: The PUC misspoke in the figures given to the Pittsburgh Post-Gazette. Snyder Brothers were actually fined a total of $499,520 — $390,250 for impact and administrative fees, $11,707.50 in interest and a fine of $97,562.50. Our thanks to NGI’s Shale Daily for tracking down the mistake and alerting us to it!

Last year we brought you the interesting story of strippers in the Marcellus–stripper wells, that is (see High-Priced Strippers in PA: Semantic Gymnastics with Impact Fee). Synder Brothers is an oil/gas producer in Pennsylvania. Most of the wells they drill are vertical-only wells. Among them are 24 wells from 2011 and 21 wells from 2012 that are vertical only–but all targeting the Marcellus. According to the definition of a stripper well under the Act 13 law passed in 2012, a well qualifies as a stripper well if it doesn’t produce over 90 thousand cubic feet (Mcf) of natural gas per day. Synder Bros. says their wells don’t, ergo their wells are stripper wells and not liable to pay an impact fee. The PA Public Utility Commission (PUC), charged with evaluating what does and does not qualify, says nope–your wells target the Marcellus formation and produced above 90 Mcf for at least one month out of the year, therefore must pay the impact fee. So the PUC has sued Snyder Bros. and intends to collect $500,000 in unpaid fees in the next 20 days, PLUS a $50,000 fine for inconveniencing the PUC…
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High-Priced Strippers in PA: Semantic Gymnastics with Impact Fee

Synder Brothers, a mostly conventional (vertical-only) oil and gas driller in Pennsylvania, is having a lover’s quarrel with the PA Public Utilities Commission over what a stripper is and isn’t. Er, a stripper well, that is. The outcome of that argument may mean Synder Brothers will have to pony up $500,000 for impact fees on wells they’ve drilled that are, according to them, “stripper wells.” And what, pray tell, is a stripper well?…
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