Corbett drilling-fee projections questioned

HARRISBURG - Counties in the state's gas drilling region shouldn't start counting their riches from impact fees just yet - they may be waiting a little longer than they thought for those dollars.

An analysis of the latest state Department of Environmental Protection data shows that there were about 1,650 Marcellus Shale wells producing in Pennsylvania as of June 30.

That's a little more than half the minimum 3,000 wells that will be needed to rake in the $120 million that Gov. Corbett estimates his proposed impact fee would raise in its first year.

The governor's energy executive, Patrick Henderson, points out that there will be plenty of time to get additional wells into action as counties debate and vote on their individual fees.

Under the current version of the plan, the counties would have to pass their fee-related rules by next March 1 in order to collect money next year.

With fee legislation still being negotiated, that gives little time for counties enact their ordinances. Unless that spring collection date is changed, counties might not be able to receive shale fee revenues until 2013.

"Obviously the timing of passage of legislation and accompanying ordinances affect this," Henderson said.

That time line could potentially require local officials seeking additional funds to wait another year for new revenue from the fees on drillers. A competing proposal backed by state Senate President Pro Tem Joe Scarnati (R., Jefferson) and others would begin distributing dollars early next year.

"We're very cognizant of when it starts and when the first distributions are going to be," said Drew Crompton, chief of staff to Scarnati. "The effective date is something that's going to continue to be reexamined."

The County Commissioners Association of Pennsylvania has expressed support for the bulk of Corbett's plan, though it voiced some reservations that counties will be pressured to craft a lower fee than their neighbors or none at all.

The organization's director, Doug Hill, said one option would be to set a later collection date during the first year of the fees, to allow time for passing the local rules.

The Corbett administration already is considering altering that date. Henderson said the March 1 collection date could be moved to April 1 to give counties and drillers more time after the new production reports are available in mid-February.

"Suffice it to say we are committed to doing so in as expeditious a manner possible," Henderson said.

Under Corbett's proposal, counties could opt to charge an initial fee of up to $40,000 per active natural gas well.

If all 26 counties with gas-producing shale wells collect that maximum levy, it would take 3,000 wells to reach Corbett's $120 million revenue estimate. The 1,643 wells listed in the summer report would raise about $65.7 million.

More than 7,500 Marcellus permits were listed on the summer report, and about 3,700 shale wells have been drilled so far. "We expect the number coming online to go up exponentially as pipeline projects are completed," Henderson said.

The Corbett administration says it believes an annual increase of 1,500 shale wells is a safe assumption. Robert Watson, an associate professor emeritus at Pennsylvania State University and coauthor of several industry-commissioned economic reports, agreed that 3,000 wells likely could be expected by the end of 2012.

Watson cautioned that competition from other drilling states, slow pipeline projects, bad weather and low gas prices could all slow growth.

Henderson said the administration is "not shooting for a specific revenue target" and understands that estimates of revenue from the proposed fees would vary with the number of active wells.