Natural Gas Industry Responds to New Pa. Law: 'I Think It's Going to Hurt a Little Bit'

In the fallout of months of bitter debate, the Associated Petroleum Industries of Pennsylvania is trying to find out if the state's General Assembly did indeed put in place a fair and reasonable impact fee.

On Wednesday, the state's House narrowly passed a bill that would implement an annual impact fee for every well drilled above the Marcellus Shale formation that lies underneath most of the Commonwealth's land mass.

While the bill has not yet been signed into law, Pennsylvania Gov. Tom Corbett made clear his intention to do so following the House vote.

Among its provisions, the bill would put in place an annual fee structure that, while dependent on natural gas prices in the U.S., ranges from $25,000 to $60,000 per well.

Stephanie Catarino Wissman, executive director of Pennsylvania's petroleum association, a branch of the national American Petroleum Institute, said companies are still assessing the amount they would have to pay based on the first-year rate.

I think it's going to hurt a little bit, it's going to sting a little bit, Catarino Wissman said, adding that companies that have entered the Marcellus Shale rush have done so with long-term investment goals.

Speaking to reporters earlier in the day Wednesday, American Petroleum Institute economist John Felmy said anytime a company's operating costs go up, its ability to operate successfully goes down, but he hopes the new law will not hurt businesses.

I hope the [fees] are such that they don't limit development, Felmy said.

As the bill is written, Pennsylvania will put in place a 15-year fee structure that declines as the years go by.

If a well produces less than 90,000 cubic feet of natural gas, it is exempt from the fee.

To date,10,020 permits have been issued to companies since 2005 when the Marcellus Shale development took off. Since then, 4,676 wells have been drilled with 1,646 wells actively producing natural gas in the region.

Counties will have the final say on imposing a fee, but if enough municipalities within a county want to implement fees, they can override the county's decision. If a county opts out of the fee structure, it will not receive any money generated by the fees imposed in other parts of the state.

The bill also created more uniform environmental regulations under which the industry is allowed to operate, for instance ensuring that wells must be 500 feet away from a home or water well.