Introduction
The Pennsylvania Public Utility Commission (“PUC”) issued a proposed rulemaking order on October 17, 2013 implementing the unconventional gas well fee (“Impact Fee”) provisions of Act 13. In large measure, the proposed regulations codify the procedures adopted in the PUC’s prior implementation orders concerning the Impact Fee authorized by Chapter 23 of Act 13. The PUC, however, does change direction from its prior orders and includes in the proposed regulations procedures for the resolution of disputes concerning the application of Impact Fees to specific wells and the refund of overpayments. Both procedures, however, require prompt action by the producer to preserve its rights.

The proposed rulemaking order and regulations will be published for comment in the Pennsylvania Bulletin. Written comments concerning the proposed regulations must be provided to the PUC within 30 days of publication in the Pennsylvania Bulletin.

Background
The PUC has entered four orders addressing the initial implementation of Chapter 23 of Act 13. [1] In an order entered December 20, 2012, the PUC provided a general discussion of Act 13 provisions in response to a producer’s petition for clarification concerning disputes and refunds. The order, however, did not identify specific dispute resolution procedures. [2]

Disputes on Individual Wells
The proposed regulations vary from the PUC’s prior order in that they provide procedures for a producer to dispute that an unconventional gas well is subject to the Impact Fee, and/or to request the refund of an overpaid gas well Impact Fee. Act 13 requires all producers to file annual producer reports with the PUC on April 1 identifying the number of its spud unconventional gas wells subject to the Impact Fee for the previous calendar year. The producer is required to submit payment of the Impact Fees with the report. Section 131.6(b) of the proposed regulations identifies a procedure to resolve disputes concerning whether a well is subject to the Impact Fee. The producer must first identify the dispute regarding payment of the Impact Fee on the annual producer report. A producer is not required to submit payment of the Impact Fee for a disputed well until the dispute has been resolved.

The PUC’s Fiscal Office will initiate an enforcement proceeding against a producer for untimely or delinquent Impact Fee payments by issuing a “Notice of Amount Due” (“Notice”). The producer must file with the PUC a written response to the Notice within 20 days of the date of service. If the producer fails to pay the amount demanded in the Notice and does not file a written response with the PUC, the producer is deemed to be in default.  If the producer files a timely written response, the matter will be referred to the PUC’s Office of Administrative Law Judge (“ALJ”) for hearing and the issuance of a recommended decision. The PUC will review the ALJ’s decision and issue a final order regarding the matter.

The PUC may assess interest and penalties against a producer for untimely or delinquent Impact Fee payments if (1) the producer fails to pay the amount identified in the Notice, (2) the producer fails to file a timely written response to the Notice, or (3) after hearing before the PUC ALJ, the PUC sustains the amount due by a final order.

Refunds or Adjustments of Overpaid Impact Fees
Sections 131.6(d),(e) and (f) of the proposed regulations identify a procedure by which a producer can request a refund or adjustment of an overpaid Impact Fee. These procedures for refunds or adjustments of Impact Fees were not previously contained in the PUC’s implementation orders and provide remedies to resolve errors in the calculation of the Impact Fee.

Refunds or adjustments of Impact Fees will not be issued unless there is a classification or computation error in the calculation of the fee. A petition for refund must be filed with the PUC Secretary by May 1 following the April 1 Impact Fee payment date. Upon expiration of the 30-day refund period, the PUC will not issue to the producer a refund or adjustment of overpaid Impact Fees. The petition for refund must be in writing and identify the name and address of the producer filing the petition, the unconventional gas well permit number, and a detailed explanation of the classification or computation error causing the overpayment. 

Conclusion
The procedures contained in Section 131.6 of the proposed regulations should simplify the process to resolve disputes concerning the application of the Impact Fee to specific unconventional wells and the refund or adjustment of overpaid Impact Fees. If the section is finally adopted as proposed, the producer must act quickly to preserve its rights.

Notes:
[1] The PUC’s implementation orders are published in the Pennsylvania Bulletin at the following citations:  42 Pa. Bull. 1744 (Tentative Implementation Order); 42 Pa. Bull. 3038 (Implementation Order); 42 Pa. Bull. 4996 (Reconsideration Order); and 43 Pa. Bull. 115 (Clarification Order).