PA Wells, Gas Production Increase

By: Michael K. Reer

On March 2, 2017, the Pennsylvania Independent Fiscal Office released its 2016 4th Quarter Natural Gas Production Report. The IFO found that production of natural gas increased 6.8% in Pennsylvania in 2016. Pennsylvania operators drilled just 504 horizontal wells in 2016, the lowest number since IFO tracking began in 2011. Despite the low number of spud wells, IFO found significant signs of an industry rebound. For example, the number of wells spud by quarter reached a low point in the second quarter of 2016 (72) before noticeably rebounding in the third (146) and fourth (176) quarters. Moreover, the number of spud but not completed wells fell 5.1% in 2016 as operators completed wells drilled in prior years. Also, production from wells spud in 2014 began declining in 2016, by nearly 2%, which may incentivize operators to drill additional wells.

Susquehanna and Washington counties were the top producing counties in 2016, followed by Bradford, Greene, Lycoming, Wyoming, Tioga, Butler, Sullivan, and Fayette. The Commonwealth currently trails only Texas in domestic natural gas production.

The Pennsylvania Department of Environmental Protection announced March 3, 2017 that the Department has launched an iPad app for electronic field inspections at oil and natural gas production sites. The app will replace paper and clipboard inspections and allow operators to receive inspection results concerning erosion and sedimentation, waterways encroachment, waste management, and spill cleanup in a more timely fashion.
Wednesday, March 08, 2017

Governor Wolf Proposes 6.5% Severance Tax


On February 7, 2017, Pennsylvania Governor Tom Wolf released his proposed 2017-18 budget for the Commonwealth, which includes a proposed 6.5% severance tax on natural gas. Under Governor Wolf’s plan, operators would be allowed to credit the amount paid in unconventional gas well impact fees against severance tax liability. Governor Wolf estimates that his tax proposal will result in over $290 million in revenue in 2017-18, and over $700 million in revenue per year by 2021-22. Governor Wolf has proposed a severance tax in each of his budget addresses thus far, but the Pennsylvania Legislature has yet to enact the tax.

In January 2017, the Independent Fiscal Office estimated that 2017 impact fee collections will total $174.6 million, which equates to an effective tax rate of 5%. The IFO’s estimated effective tax rate of 5% is significantly smaller than the 2015 effective tax rate, which was 6.9%. The IFO believes that the 2017 effective tax rate will decrease because there are not sufficient new wells to offset declines in older producing wells and because some older wells will fall below the 90 mcf threshold for tax liability. 

Thursday, February 09, 2017

Recent Posts

Tags

Archive

The Oil & Gas Law Blog is made available for educational purposes only and to give you general information as well as a general understanding of the law, not to provide specific legal advice. Use of this blog does not create an attorney-client relationship between you and any of the blog contributors or Harris Finley & Bogle. The Oil & Gas Law Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.