Snyder Brothers, an oil and gas operator, and the Public Utilities Commission are engaged in a semantic argument worth more than $500,000.
The state agency, charged with collecting an impact fee on shale wells, claims the Kittanning company hasn’t paid its full tab for at least 21 vertical Marcellus wells. Snyder Brothers says the wells are so-called stripper wells, producing so little gas that they don’t qualify for the impact fee.
The PUC is now suing Snyder Brothers, and the case is likely to go to court later this year.
“Everyone has paid” except for Snyder, said Jennifer Kocher, a spokeswoman for the PUC. “This has been an ongoing dispute for several years at this point.”
Act 13, Pennsylvania’s 2012 oil and gas legislation that established the impact fee, defines a stripper well as “an unconventional gas well incapable of producing more than 90,000 cubic feet of gas per day during any calendar month.”
According to the PUC, if a well produces more than 90,000 cf/d in any month, it is not a stripper well.
According to Snyder Brothers and its supporters at the Pennsylvania Independent Oil & Gas Association, if a well doesn’t reach that threshold during any one month, it’s a stripper well.
“We stand by our definition,” Ms. Kocher said.
“They’re looking to maximize revenue,” said Kevin Moody, vice president of the Wexford-based trade group.
The 90,000 cf/d figure comes from the Internal Revenue Service, which gives tax breaks to stripper wells.
There were 548 vertical shale wells in Pennsylvania producing gas in 2013, according to the Pennsylvania Department of Environmental Protection. Of those, 369 — or two-thirds — had an average daily flow rate of less than 90,000 cubic feet.
It’s unclear from the way the DEP presents production reports how many wells would swing one way or another depending on whose definition of a stripper well wins in the Snyder Brothers case.
Soon it may not matter, since vertical shale wells are quickly going out of fashion, said Tom Murphy, co-director of the Marcellus Center for Outreach & Research at Penn State University.
“There’s a steep decline on these wells, and pretty soon they get into stripper well category,” said Dave O’Hara, vice president at Snyder Brothers.
Mr. O’Hara declined to talk about the PUC dispute because it's a pending legal matter, but said there aren’t a lot of companies left that are drilling vertical shale wells anymore. The vast majority of new wells are horizontal because they are far more productive.
In addition to Snyder Brothers, other companies with the most vertical shale wells in the state are Atlas Energy, Cabot Oil & Gas, and MDS Energy, another Kittanning oil and gas driller led by Michael Snyder, the son of Snyder Brothers’ founder.
Anya Litvak: email@example.com or 412-263-1455.