NewsBulletin PSATS

Update on Act 13 of 2012:

All counties with wells opt to levy impact fee; Commonwealth Court extends implementation of Act 13 zoning provisions; first-year revenue estimates clarified
 
The environmental safeguards in Act 13, including setbacks from streams and a more stringent presumption that contaminated water in a well’s vicinity was caused by the industry, took effect April 14.

A lot has happened in recent weeks with Act 13 of 2012, the Unconventional Gas Well Impact Fee Act. Here’s an overview:

Counties pass ordinances to levy impact fee — All counties that currently host one or more unconventional natural gas wells have passed ordinances to impose the impact fee. As such, townships do NOT need to adopt a resolution to receive
the fees. However, municipalities in these counties must file a Municipality Approved Budget Report with the Pennsylvania Public Utility Commission by July 6, 2012. This report provides information about your township’s 2010 budget from all funds, which is necessary to determine your first distribution of the impact fee revenues.

Commonwealth Court extends implementation of Act 13 zoning provisions —  On April 11, 2012, the Commonwealth Court extended the implementation date of Act 13’s zoning provisions until August 9th.  The court ruled that “pre-existing ordinances must remain in effect until or lunless challenged pursuant to Act 13 and are found to be invalid”. The court also determined that municipalities need more time to modify their existing zoning ordinances. The court denied the remaining preliminary injunctive relief sought by seven municipalities and other parties that are challenging the Act’s constitutionality.  A copy of the order is available on www.psats.org under “Latest News.”

What does this ruling mean for townships with zoning ordinances? It means that townships now have until December 7 to bring their zoning ordinances into compliance with Act 13.  This will ensure that they remain eligible for impact fee funds and protects them from possible challenges by the industry. 

What does the Commonwealth Court ruling mean for the rest of Act 13? The court’s order does not affect any other section of Act 13. For example, owners of unconventional wells must pay impact fees by September 1, and the PUC will have to distribute those funds to counties and municipalities by December 1. In addition, the environmental safeguards in the act, including strengthened well bonding requirements, increased setbacks from streams and other waters, and a more stringent presumption that contaminated water in a well’s vicinity was caused by the industry, took effect April 14.

Clarification on calculating the first-year revenues for host municipalities — Townships with unconventional gas wells can estimate their first-year Act 13 revenues by going to www.depweb.state.pa.us, choosing the “Act 13” button at the bottom of the page, and opening DEP’s Public Utility Commission Act 13 Unconventional Wells Spud Report. This information shows how many horizontal and vertical wells were “spud” (the industry term for when drilling began) in a township. After determining the number and types of wells spud before January 1, 2012, townships should multiply the number of horizontal wells by $9,500 and the number of vertical wells by $2,200. Please note that this estimate will not include the monies being distributed to host and nonhost municipalities in host counties – a distribution that is based on liquid fuels road miles and population from the 2010 Census.

On Thursday, May 10, 2012, the Pennsylvania Public Utility Commission (PUC) issued a Final Implementation Order addressing its responsibilities under Chapter 23 of Act 13. Due to uncertainty surrounding the pending litigation challenging the constitutionality of Act 13, the PUC did not address the provisions of Chapter 33 in the Final Implementation Order. Set forth below is a brief summary of the Final Implementation Order as it relates to Chapter 23.

• The PUC confirmed that all counties with spud unconventional wells have properly passed ordinances to impose an impact fee and properly notified the PUC and the public of their actions. Therefore, all of those counties and the municipalities located therein are eligible for impact fee funds.
• All unconventional wells spud in 2011 or before 2011 will be treated as if they were spud in 2011.
• Producers with unconventional wells will pay the impact fee for at least the first three years of production; if the well then qualifies as a stripper well or is capped after the third year of paying the fee, the fee will be suspended. The spudding of a well, not the production of that well, is determinative of whether an impact fee is due for that well. Only wells drilled for the purposes of production of natural gas are subject to the impact fee.
• Plugged wells will be subject to an impact fee for a minimum of three years.
• There will be an annual upward adjustment of the impact fee if there is an upward adjustment in the Consumer Price Index for the Mid-Atlantic Region and if the number of wells spud in that year exceeds the number of wells spud in the prior year.
• Producers are required to pay the impact fee for wells spud before January 1, 2012 by September 1, 2012. The payment of fees for wells spud after January 1, 2012 will be April 1, 2013, and each April 1 thereafter.
• If municipalities or counties determine that there is a discrepancy in the well information being reported by the PUC or the DEP, they are to report them in writing to the DEP, with a copy to the PUC. Further guidance may come from DEP.
• Municipalities are required to submit a 2010 Municipality Approved Budget Report to the PUC by July 6, 2012. They will also be required to submit an Unconventional Gas Well Fund Usage Report, which documents how the impact fee funds are used, by April 15, 2013. Copies of the reports are attached to the Final Implementation Order.
• Municipalities that do not have websites shall make the Unconventional Gas Well Fund Usage Reports public in the same manner as they would make public other actions that they have taken. They do not need to establish websites in order to comply with Act 13.
• The PUC determined that the "total budget" for 2010 shall be the final approved 2010 budget by the governing body of the municipality. That is the budget number that must be reported in the 2010 Municipality Approved Budget Report. PSATS had argued that municipalities should be permitted to take into account unanticipated events that caused their 2010 budgets to increase over the budgets as they were approved in late 2009. The final approved 2010 budget will only be adjusted for inflation in future years. 2010 will be the base year rather than the immediately preceding year (in future years).