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Impact fee revenue expected to drop by 21 percent for 2019
Pennsylvania's unconventional well impact fee is projected to generate $53.6 million less for the 2019 calendar year due to low natural gas prices and a decline in new wells, according to the Independent Fiscal Office (IFO). The per-well tax should yield $198.2 million, compared to a record $251.8 million collected for 2018.

The IFO said the decrease is largely due to the average annual price of natural gas on the New York Mercantile Exchange dropping below $3, which triggered a $5,000 per-well decrease in fees. Additionally, 616 new wells were spud in 2019, the second-lowest total in a decade other than 2016, when the average annual price also dropped below $3. The record total for 2018 also included $9 million in one-time payments that had been in dispute over the interpretation of a stripper well in the section of Act 13 dealing with the impact fee.

The effective tax rate of the fee fell slightly, from 2.2 percent for 2018 to 2.1 percent last year.

Impact fees are paid by producers in April and distributed by the Pennsylvania Public Utility Commission to local governments and state programs in July.
Conventional Oil and Gas Act legislation up for consideration in House
The House Energy and Environmental Committee announced last week that it would meet January 13 to consider Senate Bill 790, creating the Conventional Oil and Gas Act. Sponsored by Senate President Pro Tempore Joe Scarnati, the bill passed the Senate by a vote of 26-23 on October 21.
EQB to give final consideration to well permit fee increase
Final consideration of the Department of Environmental Protection's proposed increase in well permit fees is on the agenda for the January 21 meeting of the Environmental Quality Board (EQB).

Under the proposal, permit fees for unconventional wells would increase to $12,500 from $5,000 for non-vertical wells and $4,200 for vertical wells. The fee for conventional wells would remain unchanged.

DEP's oil and gas program is funded almost entirely by permit fees and fines and penalties. Because drilling has not occurred at the level anticipated last time the permit fee was increased, DEP has complained it does not have the revenue to adequately administer the oil and gas program -- despite staff cutbacks and improved efficiencies.
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Support a regulatory change to allow the transport of LNG by rail

Building out small scale liquefied natural gas (LNG) represents a growth opportunity for PIOGA members, and a change in federal regulations to allow the transport of LNG by rail would greatly help the development of that market. We encourage members to submit comments in response to a proposed rulemaking by the Pipeline and Hazardous Materials Safety Administration (PHMSA).

 

On October 24, PHMSA published a notice of proposed rulemaking (NPRM), entitled "Hazardous Materials: Liquefied Natural Gas by Rail (HM-264)" proposing changes to the Hazardous Materials Regulations to allow for the bulk transport of LNG in rail tank cars. In response to a request for an extension of the comment period from the Offices of the Attorneys General of New York and Maryland, PHMSA extended the comment period for the HM-264 NPRM for an additional 21 days. Comments now are due January 13.

 

Important links:

Here are some points to consider making as part of your comments:  

  • LNG by pail provides access to new markets for producers, and equipment manufacturers and service industries.
  • Since 2013, U.S. production of natural gas has increased dramatically, resulting in growing market demand for low-cost and reduced emissions-intensive energy options for power generation and transportation fuels.
  • Current infrastructure in the Northeast U.S. is strained and pipelines have become difficult to build due to opposition; we simply must find other ways to deliver commodity. 
  • Given the abundance of domestically produced natural gas, LNG is not a commodity that is subject to geopolitical events and is a sustainable fuel for U.S. markets that lack a direct connection to energy infrastructure (i.e., pipelines and wires).  For catastrophic planning and mitigation, being able to deliver fuels for power generation, high horsepower equipment or directly to any critical-needs customers is essential and a rule such as this that recognizes the potential for occurrence and the vital role of energy will further support and distribute energy resources where needed during emergency events.
  • As PHMSA states in its proposal, LNG is a cryogenic fuel, and federal regulations already allow for the safe shipment of other cryogenic liquids by rail tank cars. This rulemaking would therefore subject LNG to the same regulations and safety procedures already in place for ethylene and other cryogenic liquids.  PIOGA therefore supports PHMSA's determination in the Special Permit docket that shipment of LNG in DOT-113C120W tank cars is "an acceptable packaging to transport Methane, refrigerated liquid (LNG) by rail," and believes that determination applies equally to all DOT-113 rail tank cars.
ODNR seeking new contractors to plug orphan oil and gas wells
The Ohio Department of Natural Resources (ODNR) Division of Oil and Gas Resources Management is seeking new contractors to plug idle or orphan oil and gas wells.  
 
Operators interested in becoming a certified contractor must be approved by the Ohio Department of Administrative Services by January 20. Once certified, contractors may participate in the bid process administered by ODNR. The Request for Proposal (SCP905520) can be viewed here. An informational pre-proposal conference will be held on Wednesday, January 8, at 10 a.m. at 2045 Morse Road, Building F-1, Columbus, Ohio. 
 
The Division of Oil and Gas Resources is developing multi-year plugging plans and multi-well bid packages and needs more contractors to carry out the projected work. ODNR plans to award up to $25 million in bids to plug approximately 200 wells in 2020.
 
Contractors with questions about the program can call 330-308-0007 or email orphanwellprogram@dnr.state.oh.us.
Events

1/23/2020
Pins and Pints Networking Event

 


Registration almost full for Pins & Pints. If you'd like to take part in this networking event at Zone 28 in Harmarville, be warned that it's almost full. As we announced last week, the event was moved to Zone 28 after the closing of the original location, Main Event Pittsburgh. Find out more and register here.  



PIOGA collectable. As part of PIOGA's celebration of 100 years of working together on behalf of Pennsylvania's crude oil and natural gas industry, we  commissioned a commemorative knife from W.R. Case & Sons Cutlery Company. The limited edition, collector quality knife and wooden display box feature PIOGA's 100th Anniversary logo. It's a great collector's piece and also makes a unique gift for coworkers, industry colleagues and petroleum history enthusiasts. Order yours now!