In an earlier post I described some examples of Marcellus wells drilled in Pennsylvania during the early 1980s, and speculated that these wells may be liable for impact fees under Act 13.
In particular, the language of Act 13, CHAPTER 23 § 2302, is quite unambiguous. Regardless of when spudding occurs, an impact fee is to be imposed on every producer of unconventional gas wells, which the Act defines as wells targeting “a geological shale formation existing below the base of the Elk Sandstone or its geologic equivalent stratigraphic interval…”
Considering the potential magnitude of the impact fees related to such “legacy” unconventional wells, yesterday I inquired about this issue with a Deputy Counsel at the Pennsylvania Public Utility Commission. He concurred with my interpretation of Act 13 — any wells targeting shale formations stratigraphically below the Elk Sandstone are liable for impact fees, regardless of when they were drilled — and indicated he would bring the matter to the attention of the Commission at its next meeting.
The Marcellus is not the only unconventional shale formation that oil and gas companies have targeted in Pennsylvania. The Rhinestreet shale is also stratigraphically below the base of the Elk Sandstone. An early example of such a well is the L. B. Southwick No. 1 well. This well was part of a larger project funded by the Department of Energy and the Morgantown Energy Technology Center, and contracted to BDM Corporation. Located in Rome Township, Crawford County, Pennsylvania, the Southwick No. 1 well was drilled in July 1985 by the Wainoco Oil and Gas Company, and the Rhinestreet interval was stimulated in February 1986. During this same time period, Wainoco drilled at least 105 other wells to the Rhinestreet Formation, though how many of these wells may have specifically targeted shales below the Elk Sandstone is not discussed.
Note: Wainoco Oil and Gas Company was incorporated in 1949, and changed its name to Frontier Oil Corporation in 1998. In 2011, Holly Corporation and Frontier Oil Corporation completed a merger of equals, at which point the combined company was renamed HollyFrontier Corporation (NYSE: HFC).