New Castle News

February 15, 2012

County introduces shale fee ordinance

Debbie Wachter Morris
New Castle News

NEW CASTLE — The Lawrence County commissioners want the county and local municipalities to reap some royalties from Marcellus Shale.

They introduced an ordinance Tuesday that would impose an impact fee on all unconventional gas and oil wells drilled in Lawrence County.

The ordinance comes directly on the heels of legislation that Gov. Tom Corbett signed into law Monday, allowing counties to impose the fees on drillers.

The fees would be shared by formula among the state, county and all municipal governments in a county, with more of that money going to the municipalities where the wells are located.

The “unconventional” gas well fees referred to in the act would apply to gas and oil wells drilled in the area for Marcellus and Utica shales, commissioner chairman Dan Vogler explained.

The commissioners will conduct a hearing at 9:45 a.m. Feb. 28 for public input before enacting the proposed ordinance at their meeting that day.

So far, two wells have been drilled in the county — by Shell Appalachiaon a Little Beaver Township farm. The company is looking to drill several more wells in the county this year.

 According to an analysis provided by the County Commissioners Association of Pennsylvania, the legislation amends the state Oil and Gas Act and allows counties to levy impact fees by ordinance.

The fee system in a county would be triggered by the presence of even just one spud well — spud meaning the actual start of drilling, Vogler explained.

The impact fees would be collected by the state Public Utility Commission as a per-well fee, Vogler said. Of the amount levied, the state would keep 40 percent and would be able to allocate that money to a variety of agencies for administration purposes related to the sale industry.

The county and municipal governments would receive 60 percent of the fee collected, which could be used for roads, bridges and infrastructure; water, stormwater and sewers; emergency preparedness and public safety; environmental and recreation programs, preservation and reclamation of water supplies; tax reductions including homestead exclusions; availability of safe and affordable housing; records management, GIS and information technology; delivery of social services; judicial services; deposits into capital reserve for use on allowable projects; career and technology centers for training related to the gas and oil industry and local or regional planning initiatives under the state municipalities planning code.

Of the 60 percent of the fees, the host counties receive 36 percent on a pro-rated basis per number of wells, Vogler explained.

Of that 60 percent, host municipalities — those where wells are drilled, will get 37 percent of that, and of the other 23 percent, half will go to host or non-host contiguous municipalities or those within five miles of a well. The other half would be distributed to all municipalities in the county.

For example, Little Beaver is a host municipality because it has two wells, and New Beaver and North Beaver are contiguous, Vogler said.

The fee is levied against all unconventional gas well spuds. The fee is levied annually per well. A well is defined as a bore hole drilled for the production of gas, so each hole on a pad is counted separately, according to the commissioners association fact sheet.

The fee is established on a sliding scale, with a duration of 15 years per well. The rate paid is determined by the average price of natural gas for the prior calendar year.

The fee for vertical wells is 20 percent of the rate for horizontal wells.

Vogler said the two wells drilled last year in Lawrence County could generate impact fees of $40,000 for the state for this year, $21,600 for the county and $38,400 as the municipalities’ share, .