Unconventional Gas Well Fees Increase for 2013
Per the requirements of Act 13, the Pennsylvania Public Utility Commission (PUC) has determined the unconventional gas well fees for calendar year 2013, published in the Pennsylvania Bulletin on February 1, 2014 at 44 Pa.B. 757. Each year, on January 1, the PUC is required to annually adjust the fee amounts as necessary to reflect changes in the average annual price of natural gas and any upward changes in the Consumer Price Index (CPI) for all Urban Consumers for the Pennsylvania, New Jersey, Delaware and Maryland area in the preceding 12 months.
For calendar year 2013, the fees – due to the PUC on April 1, 2014 – are as follows:
|
Year of Well |
Horizontal |
Vertical—Producing |
|
Year 1 |
$50,000 |
$10,000 |
|
Year 2 |
$40,000 |
$8,000 |
|
Year 3 |
$30,000 |
$6,000 |
These fees are higher than 2012 due to an increase in the average annual price of natural gas, which was $2.78 per mcf in 2012 and which rose to $3.652 per mcf in 2013. As required by Act 13, the PUC uses the New York Mercantile Exchange (NYMEX) settled price for the near-month contract for the last trading day of each month for the 12-month period ending December 31 to determine the average annual price of natural gas.
The NYMEX price then establishes the benchmark for the unconventional gas well fee. For instance, because the average annual price of natural gas was between $2.25 and $3.00 in 2012, the first year horizontal well fee was $45,000. Due to the increase in the average annual price of natural gas in 2013, which was between $2.99 and $5.00, the first year horizontal well fee is now $50,000. The same adjustment was made to year two wells, which was $35,000 for 2012 and is now $40,000 for 2013.
Although the average annual price of natural gas caused an increase in the fees, no adjustment was made for 2013 as a result of the CPI. This is because the number of wells spud did not increase: 1,347 wells were spud in 2012, while 1,205 were spud in 2013. Also, the CPI declined from 1.8% in 2012 to 1.2% in 2013. The PUC’s notice can be found at the following link:
http://www.pabulletin.com/secure/data/vol44/44-5/263.html
Environmental Quality Board Extends Public Comment Period on Proposed Performance Standards at Oil and Gas Well Sites
In the February 1, 2014 Pennsylvania Bulletin (44 Pa.B. 648), the Environmental Quality Board (EQB) published notice that the public comment period regarding the proposed environmental protection performance standards at oil and gas well sites rulemaking for 25 Pa. Code Chapter 78 (relating to oil and gas wells) is extended to March 14, 2014. In addition to the comment period extension, the EQB will be holding two additional public hearings: February 10, 2014 at the Troy High School, Troy, Pa. and February 12, 2014 at the Warren County Courthouse, Warren, Pa. The proposed rulemaking was published at 43 Pa.B. 7377 (December 14, 2013) and is available online at www.dep.state.pa.us by clicking on ”Proposed Oil and Gas Regulations.” The complete notice can be found at the following link: