PA Independent Oil & Gas Assoc. v. PUC, Aplt. ( 2018 )

[J-23A-2018 and J-23B-2018]
IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
SNYDER BROTHERS, INC., : No. 47 WAP 2017
:
Appellee : Appeal from the Order of the
: Commonwealth Court entered March
: 29, 2017 at No. 1043 CD 2015,
v. : reversing the Order of the Public Utility
: Commission entered June 11, 2015 at
: No. C-2014-2402746
PENNSYLVANIA PUBLIC UTILITY :
COMMISSION, : ARGUED: April 11, 2018
:
Appellant :
PENNSYLVANIA INDEPENDENT OIL & : No. 48 WAP 2017
GAS ASSOCIATION, :
: Appeal from the Order of the
Appellee : Commonwealth Court entered March
: 29, 2017 at No. 1175 CD 2015,
: reversing the Order of the Public Utility
v. : Commission entered June 11, 2015 at
: No. C-2014-2402746
:
PENNSYLVANIA PUBLIC UTILITY : ARGUED: April 11, 2018
COMMISSION, :
:
Appellant :
OPINION
JUSTICE TODD DECIDED: DECEMBER 28, 2018
At issue in this appeal is whether producers of natural gas from certain vertical
wells are subject to assessment of the yearly impact fee established by Chapter 23 of the
Oil and Gas Act (“Act 13”).1 The vertical wells that are the subject of this proceeding
utilize the hydraulic fracturing process, colloquially referred to as “fracking,” to extract
natural gas through a vertical well bore from the underlying geologic formation known as
the Marcellus Shale. At the heart of this dispute is whether an impact fee will be assessed
whenever a vertical well’s production exceeds an average of 90,000 cubic feet of natural
gas per day for even one month of the year, or whether the well must exceed this
production threshold in every month of the year, for the fee to be imposed. After careful
review, we conclude that, under the relevant provisions of Act 13, the impact fee will be
imposed on such wells if their production exceeds 90,000 cubic feet of natural gas per
day for even one month of the year, as found by the Public Utility Commission (“PUC”).
Therefore, we reverse the Commonwealth Court’s order, which had reversed the PUC,
and we reinstate the PUC’s order.
I. Background
An unconventional natural gas well is defined by Section 2301 of Act 13 as “[a]
bore hole drilled or being drilled for the purpose of or to be used for the production of
natural gas from an unconventional formation.” 58 Pa.C.S. § 2301. Section 2301
describes an unconventional formation as
A geological shale formation existing below the base of the
Elk Sandstone or its geologic equivalent stratigraphic interval
where natural gas generally cannot be produced at economic
flow rates or in economic volumes except by vertical or
horizontal well bores stimulated by hydraulic fracture
treatments or by using multilateral well bores or other
techniques to expose more of the formation to the well bore.
58 Pa.C.S. § 2301. The Marcellus Shale is such an unconventional geologic formation.2
1 58 Pa.C.S. §§ 2301-2318. These statutory provisions are part of the Act of February
14, 2012, P.L. 87, No. 13, which is more commonly known as “Act 13.”
2 There are two principal unconventional geological formations underlying the
Commonwealth which are rich in natural gas deposits — the Marcellus Shale and the
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Structurally, a vertical well, the type of well at issue in this case, is one in which a
bore hole is drilled vertically downwards from a point on the land surface until it enters the
top of a reservoir of natural gas pooled within an unconventional formation. By contrast,
the other type of gas well commonly drilled to extract natural gas — a horizontal well —
features a main bore hole drilled vertically downwards from a surface point to the depth
of the natural gas reservoir in the formation, with one or more horizontal bore holes
branching laterally from the main bore hole into the reservoir. Two or more horizontal
bore holes extending laterally from a single vertical bore hole are referred to as multilateral
bore holes. Joshi, PETROLEUM ENGINEERING — UPSTREAM — Horizontal and
Multilateral Well Technology at 2, available at www.eolss.net.3
Section 2302 of Act 13 provides for the imposition of an impact fee on every
producer of natural gas from an unconventional well “spud”4 in the Commonwealth where
authorized by the County or municipality in which the well is located, if the County in which
the well is located passes an ordinance authorizing the imposition of such a fee, or 50
much larger Utica Shale which lies beneath it. See https://geology.com/articles/utica-
shale/. Both formations are targets of the majority of the unconventional drilling activity
presently taking place in the Commonwealth.
http://www.dcnr.pa.gov/Geology/GeologicEconomicResources/OilAndGas/Pages/defaul
t.aspx.
Because of the impermeable nature of the rock comprising these formations, it is
necessary to stimulate natural gas production from these formations through the use of
processes such as fracking. “Hydraulic Fracturing Overview,” available at
http://files.dep.state.pa.us/OilGas/BOGM/BOGMPortalFiles/MarcellusShale/DEP%20Fr
acing%20overview.pdf. As our Court has previously explained, the process of fracking
involves “pumping at high pressure into the rock formation a mixture of sand and
freshwater treated with a gel friction reducer, until the rock cracks, resulting in greater gas
mobility.” Robinson Township v. Commonwealth. 147 A.3d 536, 543 n.4 (Pa. 2016).
3 EOLSS is an online repository of articles and books written by experts in the fields of
the physical and life sciences which was developed by UNESCO (the United Nations
Educational, Scientific and Cultural Organization).
4 Spudding is the term given to “[t]he actual start of drilling of an unconventional gas well.”
Id. at § 2301.
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percent of its municipalities pass resolutions authorizing the imposition of such a fee. Id.
§ 2302. A producer of natural gas from a vertical well must pay an impact fee if the well
meets Act 13’s definition of a “vertical gas well” — i.e. –- “[a]n unconventional gas well
which utilizes hydraulic fracture treatment through a single vertical well bore and produces
natural gas in quantities greater than that of a stripper well.” Id. § 2301. A “stripper well,”
in turn, is defined as “an unconventional gas well incapable of producing more than
90,000 cubic feet of gas per day during any calendar month.” Id.5 The impact fee on
vertical gas wells is 20% of the fee imposed on producers from other unconventional gas
wells, and vertical gas wells are exempt from assessment of such fees during their 11th
through 15th years of production. Id. § 2301, 2302(f).
The impact fees for all unconventional wells are imposed on an annual flat, per-
well basis, and calculated using the average annual price of natural gas during the
calendar year in which the fee is assessed. Id. § 2302. Producers from unconventional
wells are responsible under Section 2303 of Act 13 for self-reporting the amount of a
well’s production for each calendar year and are obligated to remit any impact fees they
owe to the PUC, along with a $50.00 per-well administrative fee.
Section 2302 allows a suspension of the operator’s obligation to pay the annual
impact fee if, within two years of paying the initial impact fee, the well is capped, or, as is
implicated by this appeal, the natural gas produced from the well falls below the statutory
limit for stripper wells. If, however, gas production from the well once again rises above
the stripper well production limit of 90,000 cubic feet per day during a particular calendar
year, then, under Section 2302, the impact fee is re-imposed for that calendar year at the
same rate as when payment was suspended. Id. § 2302(b.1). Once a well has ceased
5 The PUC calculates daily well production as an average, dividing the total amount of
gas produced by the well in a calendar month by the number of days in the month. PUC
Proposed Rulemaking Order, 10/17/13 at 8, n.14. This method of calculation is not in
dispute in this appeal.
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production altogether, and has been plugged in accordance with regulations of the
Department of Environmental Protection (“DEP”), the producer is no longer required to
pay impact fees for the well. Id. § 2302(e).
Because it is relevant to our statutory analysis below, we briefly discuss how the
General Assembly has structured the disbursement of the impact fees collected by the
PUC. The PUC deposits all impact fee payments from producers into an “Unconventional
Gas Well Fund” (the “Fund”) in the state treasury. Id. § 2301, 2314. Under Section 2314
of Act 13, 40% of this fund is reserved for annual fixed distributions by the Commission
to: county conservation districts for uses consistent with their statutory mission; the
Pennsylvania Fish and Boat Commission for review of drilling permits; the DEP for costs
associated with administering Act 13; the Pennsylvania Emergency Management Agency
to plan, coordinate, and train for accidents or incidents related to unconventional gas well
operations; the Office of State Fire Commissioner for the development of training and
funding programs for first responders and the acquisition of specialized equipment to deal
with emergencies arising out of natural gas production from unconventional wells; and to
the Pennsylvania Department of Transportation for “rail freight assistance.” Id. at §
2314(c), (c.1), and (c.2).
The remaining 60 percent of the money in the Fund is expressly reserved for
counties and municipalities in which such unconventional gas wells are located, and
which have authorized the imposition of an impact fee. Id. §§ 2302, 2314(d). Counties
and municipalities are required to use the monies they receive from the Fund “for the
following purposes associated with natural gas production from unconventional gas wells
within the county or municipality”:
(1) Construction, reconstruction, maintenance and repair of
roadways, bridges and public infrastructure.
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(2) Water, storm water and sewer systems, including
construction, reconstruction, maintenance and repair.
(3) Emergency preparedness and public safety, including law
enforcement and fire services, hazardous material response,
911, equipment acquisition and other services.
(4) Environmental programs, including trails, parks and
recreation, open space, flood plain management,
conservation districts and agricultural preservation.
(5) Preservation and reclamation of surface and subsurface
waters and water supplies.
(6) Tax reductions, including homestead exclusions.
(7) Projects to increase the availability of safe and affordable
housing to residents.
(8) Records management, geographic information systems
and information technology.
(9) The delivery of social services.
(10) Judicial services.
(11) For deposit into the county or municipality's capital
reserve fund if the funds are used solely for a purpose set forth
in this subsection.
(12) Career and technical centers for training of workers in the
oil and gas industry.
(13) Local or regional planning initiatives under the act of July
31, 1968 (P.L. 805, No. 247), known as the Pennsylvania
Municipalities Planning Code.
58 Pa.C.S. § 2314 (g) (footnote omitted).
If money remains in the Fund, after these distributions are made, it is mandatorily
transferred to a “Marcellus Legacy Fund,” from which 40 percent of the money deposited
therein is available to counties to use in repairing or replacing their “at-risk” deteriorated
bridges, as well as projects which acquire or maintain lands for “recreational or
conservation purposes.” Id. § 2315.
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II. Factual and Procedural History
Appellee, SBI, drilled, and during the relevant time period covered by this appeal
— 2011 and 2012 — operated, a number of unconventional vertical wells in Pennsylvania.
After reviewing SBI’s annual well production reports for calendar years 2011 and 2012,
the PUC’s Bureau of Investigation and Enforcement (“I & E”) determined that SBI had
failed to properly identify on those reports 45 wells as “vertical gas wells,” and that SBI
failed to remit the requisite impact fees to the PUC for them. In 2014, I & E filed a
complaint against SBI, seeking $507,586.00 in past due impact and administrative fees,
plus penalties and interest for those wells, as well as requesting that SBI be ordered to
pay an additional penalty of $50,000. SBI filed an answer to the complaint, denying
liability on the basis of its contention that the wells produced insufficient quantities of gas
to qualify as vertical gas wells and were, in fact, stripper wells, and thus exempt from the
impact fee.
The matter was assigned for adjudication to PUC Administrative Law Judge (“ALJ”)
David A. Salapa, who granted leave to intervene to Appellee the Pennsylvania
Independent Oil and Gas Association (“PIOGA”), an industry trade association
representing oil and gas producers. (Hereinafter, we will refer to SBI and PIOGA
collectively as Appellees). In those proceedings, Appellees filed a motion for summary
judgment, asserting that Section 2301’s definition of stripper well was unambiguous, and
that, under its plain language, if an unconventional well produced 90,000 cubic feet per
day of gas, or less, for even a single month in the annual reporting period, then the well
was classified as a stripper well and exempt from the impact fee.
In its response, I & E contended that the term “any” in Section 2301’s definition of
stripper well, i.e., “incapable of producing more than 90,000 cubic feet of gas per day
during any calendar month,” was ambiguous in that “any” can mean either “one or another
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taken at random,” or “every.” ALJ Opinion, 2/19/15, at 24. Thus, I & E argued that,
because of this ambiguity, it was necessary to resort to the canons of statutory
construction enumerated in Section 1921(c) of the Statutory Construction Act (“SCA”)6 in
order to properly interpret this definition. In I & E’s view, application of these factors
yielded the conclusion that the objective of the impact fee provisions of Act 13 was “to
provide relief to municipalities affected by unconventional gas wells,” and that “this
objective would be frustrated by exempting active producing wells from paying fees under
Act 13 because their production falls below 90,000 [cubic feet] of gas per day for one
month out of twelve.” ALJ Opinion, 2/19/15, at 25. The ALJ denied Appellees’ motion,
but did not enter judgment for I & E, inasmuch as it had not made its own motion for
summary judgment.
The ALJ subsequently held a hearing on December 4, 2014, at which he received
testimony from a PUC representative as to how the impact fee and attendant penalties
were computed for SBI’s wells, as well as testimony from the Vice President of SBI in
which he related his own understanding of the definition of a stripper well, and admitted
his lack of knowledge as to the PUC’s contrary interpretation at the time SBI submitted
its production reports. Thereafter, on February 19, 2015, the ALJ issued an order
sustaining I & E’s complaint and its assessment of the back fees, interest, and penalties
owed by SBI.
In his opinion accompanying this order, the ALJ framed the central question for his
consideration as “whether the gas wells that [SBI] failed to identify in its annual reports to
the [PUC] are ‘vertical gas wells’ subject to Act 13's impact and administrative fees or are
‘stripper wells’ not subject to Act 13's impact and administrative fees.” ALJ Opinion,
2/19/15, at 23. Considering the definition of stripper well in Section 2301, he explained
6 See infra at pp. 25-26.
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that he found the statutory language to be ambiguous, as evidenced by the fact that the
PUC had to issue multiple interpretative orders to explain to producers how the impact
fee was to be calculated under Act 13. These successive orders were a tentative
“Implementation Order,” issued on March 16, 2012, a final Implementation Order issued
on May 10, 2012, a “Reconsideration Order” issued on July 19, 2012, a “Clarification
Order” issued on December 20, 2012, and a “Proposed Rulemaking Order,” issued on
October 17, 2013. The ALJ noted that the PUC, in response to producer inquiries, had
explained in its Reconsideration Order that, “if a ‘vertical gas well’ produced more than
90,000 [cubic feet] per day in any calendar month in a calendar year, that well would be
subject to the impact fee.” ALJ Opinion, 2/19/15, at 26 (quoting PUC Reconsideration
Order, 7/19/12, at 5). The ALJ further observed that the PUC had also stated in its
Proposed Rulemaking Order that, even if a vertical gas well only produces quantities of
natural gas in excess of that of a stripper well for just one month during a calendar year,
the impact fee must be paid for the well. The ALJ concluded that the PUC’s interpretation
of the statute, as set forth in its interpretative orders, was entitled to “great deference,”
because it is the administrative agency charged by Act 13 with enforcing and
administering it. ALJ Opinion, 2/19/15, at 27. Consequently, the ALJ deemed the PUC’s
interpretation controlling, and, thus, concluded that it supported I & E’s assessment of
impact fees, interest, and penalties.7
7 In his statutory construction analysis, the ALJ rebuffed Appellees’ argument that the
impact fee provisions of Chapter 23 were in the nature of a tax and, hence, must be
construed in their favor. The ALJ found that the impact fee did not constitute a tax, as it
did not raise money for the general welfare of the public, or otherwise contribute to the
general fund of either the Commonwealth or the affected municipalities.
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Appellees next appealed to the PUC, which issued an opinion upholding the ALJ’s
ruling.8 Because a vertical gas well subject to assessment of an impact fee is defined by
Section 2301 as producing “natural gas in quantities greater than that of a stripper well,”
58 Pa.C.S. § 2301, the PUC viewed the dispositive question as to whether a particular
unconventional well is subject to assessment of the impact fee as whether or not the well
met Section 2301’s definition of a stripper well, i.e., did not produce more than 90,000
cubic feet of gas per day in “any calendar month.” PUC Opinion, 6/11/15, at 38 (quoting
58 Pa.C.S. § 2301).
The PUC agreed with the ALJ that the term “any” as used in the definition of
stripper well was not plain. The PUC observed that, according to Black’s Law Dictionary,
the term “any” has two meanings, “‘all’ or ‘every’ as well as ‘some’ or ‘one.’” Id. at 39
(quoting Black’s Law Dictionary at 94 (6th ed. 1990)). Thus, the PUC considered the
phrase “any calendar month” to be susceptible of two reasonable interpretations: The
first, “every calendar month” — I & E’s suggested interpretation — would relieve the
imposition of the fee only if gas production dropped to or below 90,000 cubic feet per day
in all calendar months of the reporting year. The second interpretation, offered by SBI
and PIOGA — “one calendar month” — would prohibit imposition of the fee if, in just one
month out of the year, production dropped to or below the 90,000 cubic foot per day
8 As the PUC is statutorily structured, its investigative and enforcement bureau and its
adjudicative division perform separate functions: I & E is tasked with conducting
investigations into alleged violations of laws within its jurisdictional purview, and whenever
it determines that a violation has occurred, it files a formal complaint which is heard by an
ALJ from the PUC’s adjudicative division. If the ALJ finds that a violation has occurred,
he or she then determines an appropriate penalty. A party aggrieved by the ALJ’s
decision may appeal it to the PUC Commissioners, who then collectively sit as an
administrative tribunal to decide such challenges. 66 Pa.C.S. §§ 331–335; see also PUC
v. Andrew Seder/The Times Leader, 139 A.3d 165 (Pa. 2016) (discussing the separate
roles of I & E and the PUC Commissioners in investigating and adjudicating violations).
An order of the PUC disposing of all issues raised in such an appeal is final and
appealable as of right to the Commonwealth Court. 66 Pa.C.S. § 316.
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production level, even if the well’s production exceeded the 90,000 cubic foot per day
level in all other months. Because each of these interpretations was reasonable, the PUC
determined the use of the term “any” was ambiguous.
The PUC, applying the canons of statutory construction in Section 1921(a) of the
SCA,9 observed that “one of the primary purposes” for the imposition and collection of the
impact fee was to provide financial assistance to municipalities in which drilling was taking
place, and that, to restrict collection of such fees in circumstances where production
dropped below the level in just one month out of the year, would thwart that purpose. Id.
at 41. Also, the PUC expressed its concern that relieving a producer of having to pay an
impact fee based on only one month’s reduced production would create an incentive for
“unscrupulous producers” to deliberately reduce production at a well during one month of
a calendar year to avoid paying the fee for the whole year. Id.
Further, the PUC found that a prior version of the bill which ultimately became Act
13 defined a stripper well as being “incapable of producing more than 90,000 [cubic feet]
of gas per day during a calendar month,” a definition which more readily aligns with that
proposed by Appellees. Id. at 42 (quoting H.B. No. 1950, P.N. 2837 (2011)). However,
during the consideration process, the legislature amended this language and replaced “a”
with “any” in the final bill which became Act 13. From the PUC’s perspective, this
indicates that it was not the legislature’s intent to grant an exemption from the impact fee
based on only one month’s reduced production.
Lastly, noting that this interpretation was consistent with that set forth in its
previously issued Reconsideration and Proposed Rulemaking Orders, the PUC disputed
9 This provision of the SCA mandates that “[t]he object of all interpretation and
construction of statutes is to ascertain and effectuate the intention of the General
Assembly. Every statute shall be construed, if possible, to give effect to all its provisions.”
1 Pa.C.S. § 1921
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Appellees’ assertion that I and E’s interpretation had been developed solely because of
the instant litigation, given that these orders were issued long before this litigation began.
For all of these reasons, the PUC adopted the decision of the ALJ, with some slight
modifications not relevant to the present appeal, and ordered SBI to pay $390,250 in
impact and administrative fees for 2011 and 2012, as well as $11,707.50 in interest and
$97,562.50 in penalties for those years — a cumulative total of $499,520. Appellees
appealed this order to the Commonwealth Court.
The Commonwealth Court, sitting en banc, reversed in a split, published
decision.10 Snyder Brothers v. PUC, 157 A.3d 1018 (Pa. Cmwlth 2017) (en banc). The
majority acknowledged that “any” has a multiplicity of dictionary meanings, including
those set forth in Webster’s Dictionary, which defines “any” as “(1) one: or (2) one, some,
or all regardless of quantity; (3) one or more; (4) great, unmeasured or unlimited in
amount; and (5) all.” Id. at 1023 (quoting Webster’s Third New International Dictionary
97 (1976)). Nevertheless the court found the term “any” as used in the phrase “any
month” in the definition of stripper well to be unambiguous. According to the majority, the
fact that, under Act 13, the impact fee is assessed per calendar year, the most natural
reading of “any” in this context is that it means at least one month out of the calendar
year. The majority further noted that, as used in the definition of stripper well, “any”
modified a singular noun — month — thus, in accordance with grammatical rules, it took
on the singular definition of the noun it was modifying and must mean “only one or a
singular month.” 157 A.3d at 1024.
10 Judge McCullough wrote the majority opinion which was joined by President Judge
Leavitt, and Judges Simpson, Brobson and Hearthway. Judge Wojcik authored a
dissenting opinion joined by Judge Cosgrove. For reasons not apparent of record, this
matter was originally argued before the Commonwealth Court on November 18, 2015;
however, that court did not issue a decision thereafter. The matter was re-argued on
February 18, 2017, after which the court issued the opinion and order under review in this
matter.
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The majority found support for this conclusion in Commonwealth v. Davidson, 938
A.2d 198 (Pa. 2007), in which this Court addressed the question of whether a statute
criminalizing the possession of various media containing images of child pornography
penalized the possession of each image separately, or all of the images as a whole. The
statute at issue provided that the law is violated by a person who “knowingly possesses
or controls any book, magazine, pamphlet, slide, photograph, film, videotape, computer
depiction or other material” which depicts a minor “engaging in a prohibited sexual act or
in the simulation of such act.” Davidson, 938 A.2d at 218-19. Our Court found that the
use of the term “any” meant without restriction or limitation; however, because the
enumeration of the objects in the statute, i.e., photograph, computer depiction etc., were
all singular in nature, we concluded that this plain language made each separate act of
possession of an image appearing in those formats a criminal offense. The
Commonwealth Court herein reasoned that the presence of singular nouns in the
definition of stripper well likewise supported ascribing to the term “any” its singular
meaning — i.e., “one.” So, having found the phrase “incapable of producing more than
90,000 cubic feet of gas per day during any calendar month” plain and unambiguous, the
court ruled that, whenever a gas well cannot produce more than 90,000 cubic feet per
day in any one month of a calendar year, it must be classified as a stripper well for that
year, and therefore is not subject to annual impact fees.
In arriving at this conclusion, the majority rejected the PUC’s argument that its
interpretation was consistent with the provision in Act 13 governing when a “restimulated”
well11 was subject to an impact fee under Section 2302(d) of Act 13, 58 Pa.C.S. § 2302(d).
That section provides, in relevant part, that a restimulated well is subject to an impact fee
11 A restimulated unconventional gas well is a natural gas well eleven years old or more,
which experiences a “substantial increase in production” through the use of hydraulic
fracturing, drilling of additional multilateral well bores, extension of a vertical bore hole to
greater depths, or other production stimulation techniques. 58 Pa.C.S. § 2302(d).
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for a “substantial increase in production” which it defines as “an increase in production
amounting to more than 90,000 cubic feet of gas per day during a calendar month.” 58
Pa.C.S. § 2302(d)(3) (emphasis supplied). The majority did not accept the PUC’s
argument that this provision indicated the legislature intended that any well which has
production in excess of 90,000 cubic feet of gas per day for even one calendar month is
subject to the impact fee. The majority reasoned that fees for restimulated wells were “a
unique brand of fees that are separate and distinct” from impact fees for vertical
unconventional gas wells. Snyder Brothers, 157 A.3d at 1025.12
Although the majority expressed confidence in its plain meaning interpretation, it
conceded that the interpretation offered by the PUC was “at the very least, reasonable.”
Id. at 1026. Thus, the majority proceeded to engage in its own statutory construction
analysis, discounting all of the factors cited by the PUC in its analysis. First, the majority
afforded no credence to the PUC’s concern that, were Appellees’ proffered interpretation
adopted, well operators could avoid payment of the fee by simply reducing production in
just a single month of a calendar year. The majority found no evidence of record that SBI
had ever engaged in such manipulation of well production output. The majority then
seemingly questioned the notion of whether any well operators would ever engage in
such conduct. The majority suggested that such manipulation if it were to occur, would
result in civil fines and penalties.
The majority also rejected the notion that the desire to collect more impact fees for
the government was a legitimate basis for liberally construing the statute in the manner
employed by the PUC. The majority noted that counties and municipalities were not
intended to be the primary beneficiaries of the impact fee as they were only fifth in line to
12 As explained, infra, this was an incorrect interpretation of Act 13, inasmuch as there is
only one impact fee for all types of unconventional gas wells. See infra note 24.
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receive money from the impact fees, so it characterized them as mere “incidental”
beneficiaries. Id. at 1027.13 The majority furthermore suggested that a county, in order
to receive revenue from unconventional gas wells, was free to impose its own fees on
such wells in an amount equivalent to the assessments payable to the PUC provided for
Section 3202.14 Additionally, the majority discounted the importance of the change in
language from “a” to “any” from an earlier version of the bill, due to the absence of any
legislative history explaining the reason for the change.
Further, the majority gave scant weight to the PUC’s interpretation in its Proposed
Rulemaking Order, as, in its view, that order was specifically defining the criteria for
vertical gas wells, not stripper wells, and offered “no clarification or meaningful distinction
between a vertical gas well and a stripper well.” Id. at 1028 n.15. Consequently, the
majority viewed the PUC’s interpretation as one which was developed as a result of the
instant litigation, not as part of the rulemaking process, and thus was not entitled to great
deference.
Finally, the majority observed that, because civil penalties may be imposed under
Act 13 for failure to pay the impact fee — up to 25 percent of the amount owed — this
rendered the statute penal in nature. Thus, because the definitions of stripper well and
vertical gas well were, in its view, vague and without meaningful distinction, the majority
considered it necessary to apply the rule of lenity and strictly construe these definitions in
13 As the PUC highlights, see PUC Brief at 25, and as we discuss at greater length infra,
this was a grievous minimization of the degree of benefit counties and municipalities
realize from the amount of impact fees collected, given that both are entitled to the
majority of money — 60 percent — remaining in the Fund after distributions to
conservation districts and state agencies, and as an additional 40% of the funds in the
Marcellus Legacy Fund is dedicated to county bridge and recreational projects. 58
Pa.C.S. §§ 2314 & 2315.
14 This too was an incorrect interpretation of Act 13 by the Commonwealth Court, as the
parties agree that neither counties nor municipalities are authorized by Act 13 to collect
separate impact fees payable to them.
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favor of SBI, so as to avoid finding them unconstitutionally void for vagueness. For all of
these reasons, the majority concluded that the term “any” meant “one” and not “all” or
“every,” and it reversed the Commission’s order finding SBI in violation for failing to pay
impact fees on the wells at issue.
Judge Wojcik, joined by Judge Cosgrove, filed a dissenting opinion. The dissent
agreed with the PUC’s interpretation of the statute, based on that body’s application of
the principles of statutory construction. Like the PUC, the dissent found it significant that
the word “a” appearing in an earlier version of the definition of stripper well in a prior
version of Act 13 considered by the General Assembly was replaced by “any” in the final
version of the bill that was passed, and, thus, indicated that the PUC’s interpretation was
consistent with legislative intent. The dissent found persuasive the PUC’s concern that
adopting Appellees’ suggested construction would hinder the assessment of impact fees
which would, in turn, thwart the primary legislative purpose of imposing such fees, which
the dissent perceived as giving “relief to municipalities affected by unconventional gas
drilling.” Id. at 1031. The dissent agreed with the PUC that Appellees’ suggested
construction gave drillers an incentive to deliberately reduce production levels in one
month in order to avoid paying impact fees for the entire calendar year.
Lastly, the dissent rejected the argument that the statute should be strictly
construed in favor of drillers, because, in the dissent’s view, the legislative intent in
enacting the statute could be determined by application of the principles of statutory
construction, particularly the canon which requires substantial deference to the
interpretation afforded the statute by the administrative agency which has the
responsibility of enforcing it. Consequently, the dissent considered the PUC’s prior
interpretations set forth in its interpretative orders as entitled to great weight, which
[J-23A-2018 and J-23B-2018] - 16
deference, in the dissent’s view, the majority failed to exercise; hence, the dissent would
have upheld the PUC’s order and the attendant interest and penalties it imposed.
The PUC petitioned for allowance of appeal, asserting that the Commonwealth
Court’s finding that the definition of stripper well in Section 2301 was clear and
unambiguous was erroneous, and, also, that the court’s alternative statutory construction
analysis was likewise in error. We granted the petition for allowance of appeal, 15 heard
oral argument from the parties on April 11, 2018, and we now address both of the PUC’s
challenges.
III. Arguments of the Parties
The PUC argues the Commonwealth Court erred by finding that the definition of
stripper well was clear and unambiguous, particularly since that court acknowledged that
the term “any” had a multiplicity of dictionary meanings, one of which was singular, and
one which was plural. Further, the PUC observes that the Commonwealth Court’s
conclusion is undercut by the fact that it took two years and two en banc oral arguments
to decide this question, and as it engaged in an alternative ambiguity analysis in its
opinion, which suggests it was not certain about its plain meaning approach. The PUC
reiterates its view that the use of the term “any” is ambiguous and, thus, that statutory
construction is warranted to choose which of the two arguably reasonable interpretations
of that term is the correct one.
The PUC contends that the Commonwealth Court misread the provisions of Act
13. It disputes the Commonwealth Court’s conclusion that Section 2302(d)(3) of Act 13,
governing impact fees for restimulated wells, is irrelevant in determining whether these
wells are subject to an impact fee. The PUC underscores that there is no separate “re-
stimulation fee,” as the Commonwealth Court concluded, but rather only one impact fee
15 See Snyder Brothers v. PUC, 172 A.3d 1119 (Pa. 2017) (order filed October 18, 2017).
[J-23A-2018 and J-23B-2018] - 17
imposed on all unconventional gas wells that reach specified production levels. The PUC
argues that, because Section 2302(d)(3) requires that an impact fee be assessed in the
event that a restimulated well exceeds “90,000 cubic feet of gas per day during a calendar
month,” PUC Brief at 19 (quoting 58 Pa.C.S. § 2302(d)(3)), this supports the conclusion
that the legislature, as a general matter, conceived of the impact fee as payable for all
wells that produce natural gas in an amount exceeding 90,000 cubic feet of gas a day in
a single month of the calendar year. The PUC asserts that its construction of the definition
of a stripper well is consistent with the legislative intent behind the imposition of the fee,
namely, “to mitigate damages due to gas drilling and production, which damages accrue
regardless of the ultimate productivity of a particular well.” PUC Brief at 19-20.
Next, the PUC points out the Commonwealth Court’s interpretation of these
sections lead to an absurd and unreasonable result in practice, since, under this
interpretation, a well producing, for example, 100,000 cubic feet for every month of a
calendar year must pay the fee, whereas a well producing 200,000 cubic feet of gas a
day in every month of the year but one, for which production decreases to 90,000 cubic
feet of gas a day, would evade payment of the fee, even though the second well’s total
yearly production would be nearly two times greater than that of the first well. The PUC
concludes that all of these factors establish that the language in question is far from clear
and unambiguous.
The PUC next assails the Commonwealth Court’s application of the relevant
statutory construction factors in Section 1921(c) of the SCA. First, the PUC emphasizes
that the Commonwealth Court erred in concluding that counties and municipalities may
impose their own separate assessments on gas wells, as Act 13 allows the imposition of
only one impact fee, which is collected and disbursed by the PUC, and the Act contains
no provision allowing counties and municipalities to impose their own additional fees.
[J-23A-2018 and J-23B-2018] - 18
Consequently, there is no alternate source of revenue for the counties and municipalities
from drilling activities within their borders.
Indeed, in the PUC’s view, this initial erroneous assumption — that the counties
and municipalities had the ability to impose their own fees — was the source of the
Commonwealth Court’s subsequent faulty conclusion that the PUC’s statutory
construction did not further the primary purpose of its enactment: providing counties and
municipalities financial relief to offset the impacts of drilling. The PUC disputes the
Commonwealth Court’s conclusion that counties and municipalities can be considered
merely “incidental beneficiaries” of the impact fee. PUC Brief at 25 (quoting Snyder
Brothers, 157 A.3d at 1027). The PUC points out that municipalities are entitled to 60%
of all revenue remaining in the Fund after the statutorily required fixed disbursements are
made to conservation districts and state agencies. Moreover, municipalities may also
apply to receive monies from the remaining 40% of the non-disbursed impact fee revenue,
which is deposited into the Marcellus Legacy Fund to ameliorate the effects of drilling in
their communities.
The PUC also decries the Commonwealth Court’s disregard of the change in
statutory text as this legislation was being considered, noting that one does not need
accompanying legislative history to recognize that a change from “a” to “any” in the
definition of stripper well had significance, in and of itself, because it clearly signified that
the legislature intended to require well production to drop below the 90,000 cubic foot
level in more than a single month in order for it to be classified as a stripper well.
Additionally, the PUC argues that the Commonwealth Court improperly
characterized Act 13 as a penal statute because of its provisions imposing a fine for failure
to pay the impact fee. The PUC asserts that the fines and other penalty provisions, see
58 Pa.C.S. §§ 2308–2310, are merely enforcement mechanisms to ensure the timely
[J-23A-2018 and J-23B-2018] - 19
payment of the impact fees by producers, and, therefore, are wholly separate from the
portion of the statute at issue in the present case, which sets forth the mechanism for
assessment of the fee; hence, the application of the rule of lenity is inapplicable to
interpretation of these non-penal provisions. The PUC further notes that, while taxing
statutes are to be strictly construed in favor of the taxpayer, this presumption is not applied
until all other efforts at statutory construction have proven fruitless; thus, even if the impact
fee were to be considered a taxing statute, its use of the term “any” can be readily
interpreted using the rules of statutory construction without resort to this presumption.
The PUC asserts, however, that the presumption that the legislature did not intend
an absurd or unreasonable result in enacting a statute is applicable in conducting a proper
statutory construction analysis in this matter. The PUC contends that, based on the same
reasons discussed in the first part of its brief, its construction avoids the absurd and
unreasonable outcome where a producer is able to avoid paying the fee for a well for an
entire year based on only one month’s reduced production from the well. In the PUC’s
view, the Commonwealth Court’s interpretation, by contrast, would constitute an
inducement for operators to manipulate well production so as to avoid payment of the
impact fee.
Lastly, the PUC maintains that the Commonwealth Court failed to accord the
agency’s interpretation the requisite degree of deference to which it was entitled, as it is
the administrative agency charged with the interpretation and application of the statute,
and its interpretation is not clearly erroneous. The PUC disputes the Commonwealth
Court’s conclusion that it “flip flopped” on the question of what level of production is
required for payment of the impact fee, observing that, in 2012 when it first had to interpret
the statute and collect the fee, it stated in its Reconsideration Order that, if a vertical gas
well exceeded the 90,000 cubic feet of gas per day production level in one month of a
[J-23A-2018 and J-23B-2018] - 20
calendar year, then it was subject to the yearly impact fee, and it continued to adhere to
this interpretation in its 2013 Implementation Order. Further, the PUC denies that it
developed this interpretation in anticipation of litigation, noting that its interpretative orders
were promulgated far in advance of the litigation. The PUC asserts that, because its
interpretation was reasonable, it was entitled to deference and the Commonwealth Court
overstepped its role in disregarding this interpretation. The PUC reminds that our Court
has consistently reversed the Commonwealth Court for failing to accord administrative
agencies the proper degree of deference in interpreting the statutes they are charged with
administering.
In response, SBI contends the term “any” as used in the definition of stripper well
is clear and unambiguous and means “one,” as the Commonwealth Court found. SBI
argues that this interpretation is in accord with its common and approved usage, and,
thus, the Commonwealth Court properly read the statute as classifying a well as a stripper
well if its production falls to or below a daily average of 90,000 cubic feet of gas in “any
one month.” SBI asserts that, if the legislature intended to require the well be incapable
of producing more than 90,000 cubic feet of gas per day in all months of a calendar year
in order to be exempt, it would have used more precise language, such as “every month,”
“each month,” or “all months.” SBI Brief at 11. SBI claims that the PUC is, in essence,
interpreting this statutory language to create a presumption that, because a well is
capable of exceeding the statutory production cap of 90,000 cubic feet of gas per day in
one month of a calendar year, it is capable of doing so in all months. SBI contends there
is no predicate factual basis for such an assertion. SBI argues that what the PUC is really
doing with its proffered interpretation is attempting to broaden the scope of the definition
of a stripper well in order to make more wells subject to the impact fee, and, thus,
maximize the amount of revenue it is collecting on behalf of counties and municipalities.
[J-23A-2018 and J-23B-2018] - 21
SBI next argues that, even were our Court to consider the term “any” to be
ambiguous, application of the rules of statutory construction yields the same conclusion
that the definition of “any” means one. First, SBI contends that, because Section 2308(b)
of Act 13 imposes substantial penalties on producers who fail to pay the impact fee, it is
a penal statute and thus should be narrowly construed under the rule of lenity. SBI
renews its prior contention, made before the ALJ and PUC, but not addressed by the
Commonwealth Court, that the impact fee is actually a tax, despite not being labelled as
such, and, as a result, its terms should be construed in SBI’s favor under Section
1928(b)(3) of the SCA, which requires strict construction of statutory “[p]rovisions
imposing taxes.” 1 Pa.C.S. § 1928(b)(3). SBI argues that, because the impact fee is a
revenue producing measure which generates a large amount of money for counties, and
is disproportionately greater than the costs incurred in collection and supervision fees
incurred by the PUC in its collection, it must be considered a tax. Additionally, SBI
maintains that, because the greatest bulk of the revenue generated by the impact fee is
used for a multiplicity of purposes unrelated to defraying the costs incurred by the PUC’s
regulation of unconventional gas drilling, including possibly the reduction of other taxes,
such uses further support the conclusion that the impact fee is really a tax in another
guise.
Finally, SBI claims that the PUC’s interpretation of the term “any” is entitled to no
deference since the Commonwealth Court’s interpretation tracks the plain meaning of the
term as used in the statute. Moreover, in SBI’s view, the PUC’s related administrative
orders were not enacted according to formal rulemaking procedures which require public
notice, the opportunity for public comment, and review of those comments by the Attorney
[J-23A-2018 and J-23B-2018] - 22
General and the Independent Regulatory Review Commission.16 Therefore, as mere
“non-legislative rules,” or agency “pronouncements,” they are not entitled to the
“particularly high measure of deference” as rules which are the product of the formal
rulemaking process. SBI Brief at 24 (quoting Northwestern Youth Services v. DPW, 66
A.3d 301, 310-311 (Pa. 2013)). SBI further avers that the PUC’s current definition of
“any” was developed in response to this litigation, and is at odds with its prior view that
“any” meant one, which it took in its prior Proposed Rulemaking Order. SBI notes that, in
that order, the PUC interpreted the term “any” as having a singular meaning in discussing
when an unconventional well is a vertical gas well — namely, if well production exceeds
90,000 cubic feet of gas per day in any month.
In its response to the PUC, PIOGA argues that the meaning of the term “any” must
be determined by the context in which it is used in Act 13’s definition of stripper well, and
when that context is considered, it was clearly meant to have a singular meaning. PIOGA
discounts the PUC’s reliance on the multiple meanings ascribed to this word enumerated
in the dictionary, as, in its view, this means nothing, arguing that, merely because a word
is capable of multiple meanings does not indicate that it must have alternative meanings.
PIOGA contends that, because the meaning of the term “any” as used in the stripper well
definition is clear, the Commonwealth Court’s ambiguity analysis is superfluous dicta
which this Court should strike, particularly since PIOGA agrees with the PUC that the
Commonwealth Court’s opinion erroneously stated that counties may independently
impose their own fees at the local level.
PIOGA, however, agrees with the Commonwealth Court that maximizing revenue
to governmental bodies is not an acceptable statutory construction factor. It also argues
16See Commonwealth Documents Law, 45 P.S. §§ 1102–1602, and 45 Pa.C.S. §§ 501–
907; Regulatory Review Act, 71 P.S. §§ 745.1–745.14; and the Commonwealth Attorneys
Act, 71 P.S. §§ 732–101 to 732–506.
[J-23A-2018 and J-23B-2018] - 23
that, because there was no explanation from the General Assembly as to why the word
“a” in the earlier form of this legislation was changed to “any”, this change may not be
considered relevant legislative history. PIOGA Brief at 19.
PIOGA further attacks PUC’s reliance on its prior interpretative orders to furnish a
suitable definition of “any”, due to the fact that, in those orders, the PUC was not
interpreting the definition of a stripper well, but, rather, was setting forth the production
levels required for vertical gas wells to be subject to the impact fee. PIOGA asserts that
the PUC gave the term “any” its singular meaning in that context by declaring that, if a
vertical gas well produces more than 90,000 cubic feet of gas per day in any single
calendar month of the reporting year, it will be subject to the fee for that year. PIOGA
argues that PUC cannot have it both ways by stating in its orders that a vertical well is
subject to the impact fee if in any month the production exceeds 90,000 cubic feet of gas
a day, which assigns to “any” its singular meaning, while at the same time arguing that,
for a well to be classified as a stripper well, its production must fall below the 90,000 cubic
feet of gas a day cap in every month of the calendar year, giving “any” a plural meaning.
PIOGA asserts that both interpretations cannot be correct. PIOGA also contends that the
PUC’s interpretation is not entitled to deference inasmuch as this is a purely legal question
of statutory interpretation, an area in which the PUC has no special expertise.17
17 Senator Joseph Scarnati, the President Pro Tempore of the Pennsylvania Senate who
served on the House/Senate Conference Committee which produced the final version of
the legislation that became Act 13, H.B. 1950, P.N. 3048, and Senator E. Eugene Yaw,
a member of the Senate Environmental Resources and Energy Committee when H.B.
1950 was being considered, have filed a joint amicus brief in support of the arguments of
SBI and PIOGA. They argue that the entire legislative history of Act 13 needs to be
examined in order to discern the legislative intent. They point out that earlier versions of
this legislation contained no definition of a stripper well; rather, those bills referred only to
a “nonproducing well,” and defined such a well as “[a] natural gas well that produces an
average of less than 90,000 cubic feet of natural gas per day during a calendar year.”
Amicus Brief at 3, 6. Amici highlight the fact that the final version of this legislation, in
which the term “nonproducing well” was changed to “stripper well,” also altered the
[J-23A-2018 and J-23B-2018] - 24
IV. Analysis
Because issues of statutory interpretation are questions of law, our standard of
review is de novo, and our scope of review is plenary. SEPTA v. City of Philadelphia,
101 A.3d 79, 87 (Pa. 2014). It is axiomatic that, “if the General Assembly defines words
that are used in a statute, those definitions are binding.” PUC v. Andrew Seder/The Times
Leader, 139 A.3d 165, 173 (Pa. 2016). Our interpretation of the relevant definitional
language at issue in this case is guided by the precepts of the SCA, 1 Pa.C.S. §§ 1501–
1991. Pursuant to the SCA, the overriding object of all statutory interpretation and
construction “is to ascertain and effectuate the intention of the General Assembly” in
enacting the statute under review. 1 Pa.C.S. § 1921(a). Correspondingly, we are
required to interpret or construe a statute so as to give effect to all of its provisions, “if
possible.” Id. If statutory language is “clear and free from ambiguity, the letter of it is not
to be disregarded under the pretext of pursuing its spirit.” 1 Pa.C.S. § 1921(b). Thus,
when the words of a statute have a plain and unambiguous meaning, it is this meaning
which is the paramount indicator of legislative intent.
However, in situations where the words of a statute “are not explicit,” the
legislature’s intent may be determined by considering any of the factors enumerated in
Section 1921(c). DEP v. Cumberland Coal, 102 A.3d 962, 975 (Pa. 2014). These factors
are:
(1) The occasion and necessity for the statute.
(2) The circumstances under which it was enacted.
(3) The mischief to be remedied.
relevant production time frame from “a calendar year” to “any calendar month.” This fact,
in their view, signifies the legislature’s intent to allow waiver of the fee whenever there is
a drop in well production of natural gas below 90,000 cubic feet in any given month, and
not to require that production drop below that level for the entirety of an entire calendar
year as in the prior legislation.
[J-23A-2018 and J-23B-2018] - 25
(4) The object to be attained.
(5) The former law, if any, including other statutes upon the
same or similar subjects.
(6) The consequences of a particular interpretation.
(7) The contemporaneous legislative history.
(8) Legislative and administrative interpretations of such
statute.
1 Pa.C.S. § 1921(c).
Further, the SCA establishes specific presumptions applicable to the interpretation
and construction of all statutes which are aids in determining legislative intent. Three of
these presumptions are apposite to the case at bar: (1) “the General Assembly does not
intend a result that is absurd, impossible of execution or unreasonable,” (2) “the General
Assembly intends the entire statute to be effective and certain,” and (3) “the General
Assembly intends to favor the public interest as against any private interest.” 1 Pa.C.S.
§ 1922(1),(2), and (5).
We begin by noting that, despite the parties’ and the Commonwealth Court’s
primary focus in their arguments on the proper interpretation of the definition of “stripper
well” in Section 2301, it is not that definition, standing alone, which is dispositive of the
central question in this case. As recognized by the ALJ in this matter, the fundamental
issue raised by I & E’s investigation and complaint, and which was the subject of his
adjudication that triggered the subsequent appellate proceedings below, was “whether
the gas wells that [SBI] failed to identify in its annual reports to the Commission are
‘vertical gas wells’ subject to Act 13’s impact and administrative fees or are ‘stripper wells’
not subject to Act 13’s impact and administrative fees.” ALJ Opinion, 2/19/15, at 23.
Consequently, the pivotal question presented by this appeal remains whether the 45
unconventional vertical wells at issue meet Section 2301’s definition of “vertical gas well,”
as alleged by the PUC, and are subject to the assessment of an impact fee; thus, it is the
[J-23A-2018 and J-23B-2018] - 26
definition of “stripper well,” as it has been incorporated and utilized in the definition of
“vertical gas well,” which is controlling of our resolution of this question.
As noted, Section 2301 defines a “vertical gas well” as “an unconventional gas well
which . . . produces natural gas in quantities greater than that of a stripper well.” 58
Pa.C.S. § 2301 (emphasis added). A “stripper well,” in turn, is “an unconventional gas
well incapable of producing more than 90,000 cubic feet of gas per day during any
calendar month.” Id. Accordingly, in order for SBI’s wells to have qualified as vertical gas
wells during the calendar years 2011 and 2012, they must have produced natural gas in
excess of the production ceiling which categorizes a well as a stripper well — in other
words, they must have produced “more than 90,000 cubic feet of gas per day during any
calendar month.”18 Id. In making the determination of whether the wells in question
exceeded this production level, we are required to interpret the word “any” as used in the
relevant production time frame — namely, “any calendar month.”
The word “any,” which is not otherwise defined by Act 13, nor by the SCA,19 has
two commonly accepted alternative meanings in the English language which are
diametrically opposed. Black’s Law Dictionary recognizes this “diversity of meaning,”
which is dependent on the context in which “any” is used in a statute, as well as the
statute’s overarching subject; thus, “any” could mean “‘all’ or ‘every,’ as well as ‘one.’”
Black’s Law Dictionary 94 (6th ed. 1991). This definitional dichotomy is also recognized
18While we set forth this definition as focused on a well’s actual production, we recognize,
as noted above, that “stripper well” is defined more broadly, in terms of the capability to
produce, not merely actual production. Nevertheless, given the issue before us, this
distinction is not relevant. Specifically, to the point raised by the dissent, see Dissenting
Opinion (Mundy, J.) at 4-5, we find nothing about the peculiarities of the stated threshold
– here, “incapable of producing more than 90,000 cubic feet of gas per day” – that affects
our interpretation of “any” in “any calendar month”. Accordingly, and in line with the
parties’ arguments and the factual basis for the PUC’s determination, we will discuss the
matter with regard to a well’s actual production.
19 See 1 Pa.C.S. § 1991 (providing definitions for select words when they appear in any
statute enacted after September 1, 1937).
[J-23A-2018 and J-23B-2018] - 27
by dictionaries of the English Language. See Webster’s New Universal Unabridged
Dictionary 96 (2001) (defining “any” as “one,” and, alternatively, as “every,” or “all”); The
American Heritage Dictionary 117 (2nd. coll. ed. 1982) (enumerating varying definitions
of “any” to include “one or another without restriction or exception,” or “[t]he whole amount
of; all”).
Our Court’s jurisprudence has also held that the term “any” can have either of
these two divergent meanings, depending on how it is used in a particular statute.
Compare Commonwealth v. Heller, 67 A. 925, 926 (Pa. 1907) (interpreting terms “any
city” in statutory enactment which enabled cities of the third class which owned water,
gas, or electrical facilities to establish a department for the provision of these services to
their citizens, as referring to individual third class cities which met this ownership criteria,
not all third class cities which have such facilities within their borders; “‘any city’ . . .
primarily refers to cities individually. It may include all, but does not necessarily do so.”)
with In re Estate of Belefski, 196 A.2d 850, 851, 855 (Pa. 1964) (holding that statute which
provided that amounts payable from Commonwealth Retirement Fund for public
employees were “exempt from any State or municipal tax,” included all taxes such as the
Pennsylvania inheritance tax; “[t]he word ‘any’ is generally used in the sense of ‘all’ or
‘every’ and its meaning is most comprehensive.”). Thus, we consider the meaning of the
term “any” to be wholly dependent on the context in which it is used in the particular
statute under review. See generally In re Estate of Wilner, 142 A.3d 796, 804-05 (Pa.
2016) (“[L]egislative words are to be read in their context and not in isolation.”); O’Rourke
v. Commonwealth, 778 A.2d 1194, 1201 (Pa. 2001) (same); accord Heller Benat v.
Mutual Benefit Health & Accident Association, 159 A.2d 23, 25 (Pa. Super. 1960) (“[T]he
word ‘any’ is not susceptible of a categorical definition meaning ‘all’ or ‘every’ . . . The
significance of the word ‘any’ is discoverable in its context.”), affirmed on the basis of the
[J-23A-2018 and J-23B-2018] - 28
Superior Court opinion, Benat v. Mutual Benefit Health & Accident Association, 166 A.2d
880 (Pa. 1961).
If a statutory term, when read in context with the overall statutory framework in
which it appears, has at least two reasonable interpretations, then the term is ambiguous.
A.S. v. Pennsylvania State Police, 143 A.3d 896, 906 (Pa. 2016). Because the alternative
definitions of “any” are equally plausible, and as neither is absurd or unreasonable on its
face, we find that “any,” as used in this context, is ambiguous. Trust Under Agreement
of Taylor, 164 A.3d 1147, 1156 (Pa. 2017); see also McGrath v. Bureau of Professional
& Occupational Affairs, State Board of Nursing, 173 A.3d 656, 662 n. 8 (Pa. 2017) (“[T]he
‘not explicit’ prerequisite of [1 Pa.C.S. 1921(c)] logically applies where . . . any reading of
the statute's plain text raises non-trivial interpretive difficulties.” (emphasis original)).
Hence, we resort to the statutory construction factors enumerated in Section 1921(c) of
the SCA is necessary to determine the proper construction of this term.
Turning to these factors, we first find “[t]he occasion and necessity for the statute;”
the circumstances under which it was enacted;” and “the object to be attained,” as well
as the legislative history of Act 13, to be particularly helpful in discerning the relevant
legislative intent behind the enactment of the impact fee. 1 Pa.C.S. § 1921(1), (2), (4),
and (7).20
20 Although Appellees argue that the impact fee provisions of Act 13 are a tax, and, thus,
should be strictly construed in their favor pursuant to Section 1928(3) of the SCA, we
disagree. First, the General Assembly deliberately avoided labeling the impact fee as a
tax, and, indeed, imposed this fee in lieu of a severance tax, which opponents of the
legislation had advocated for, and, during the floor debate prior to final passage of Act 13,
specifically decried the omission therefrom. See, e.g., House Legislative Journal 164-
168, 192-93, 196, 199 (February 8, 2012). Further counseling against treatment of
Chapter 23’s impact fee provisions as a tax is the fact that Chapter 23 contains a sunset
provision which states that “upon the imposition of a severance tax on unconventional
gas wells in this Commonwealth” the Secretary of the Commonwealth shall publish notice
of the imposition of such a tax in the Pennsylvania Bulletin; whereupon, all of the impact
[J-23A-2018 and J-23B-2018] - 29
Contrary to the characterization of the Commonwealth Court, counties and
municipalities are no mere “incidental” beneficiaries of the impact fee. Rather, as the
legislative history and statutory structure of this provision demonstrates, they are the
primary intended beneficiaries of this fee. As our Court has previously observed, the
process of drilling and operating an unconventional gas well utilizing the fracking process
— an industrial land use — has significant effects on the communities in which it occurs.
In Robinson Township v. Commonwealth, 83 A.3d 901, 979 (Pa. 2013), a plurality of our
Court noted that communities in which such well drilling and extraction occur suffer
“environmental and habitability costs associated with this particular industrial use: air,
water, and soil pollution; persistent noise, lighting, and heavy vehicle traffic; and the
building of facilities incongruous with the surrounding landscape.” Justice Baer,
concurring separately in that seminal case, also detailed the significant deleterious
aspects of the various activities attendant to unconventional well drilling and operation:
“these industrial-like operations include blasting of rock and other material, noise from the
running of diesel engines, sometimes nonstop for days, traffic from construction vehicles,
tankers, and other heavy-duty machinery, the storage of hazardous materials, constant
fee provisions contained in Chapter 23 expire. 58 Pa.C.S. § 2318. No such notice has,
to date, been published.
Even assuming arguendo that the statute establishing the impact fee constitutes a
tax, this fact alone would not require us to automatically strictly construe it. In Dechert
L.L.P. v. Commonwealth of Pennsylvania, 998 A.2d 575, 584 n.8 (Pa. 2010), we
repudiated the contention that our Court must always give a taxing statute the narrowest
possible construction, as such a constrictive reading may not effectuate the legislative
intent behind its enactment. It is only after all efforts at statutory construction “yield no
definitive conclusion,” that we will read a taxing statute in this fashion. Id. As explained
in greater detail infra, such efforts do lead to a definitive conclusion as to the meaning of
the impact fee provisions at issue; hence, we find resort to this presumption would be
unnecessary, even if we considered the impact fee to be a de facto tax.
[J-23A-2018 and J-23B-2018] - 30
bright lighting at night, and the potential for life-and property-threatening explosions and
gas well blowouts.” Id. at 1005 (Baer, J., concurring).
The legislative debates which occurred during the adoption of Act 13 indicate the
General Assembly was cognizant of how the myriad activities associated with the drilling
and production operations of unconventional gas wells would have negative
repercussions on a municipality’s physical infrastructure, thereby causing their
governments to incur increased costs to maintain or upgrade that infrastructure, as well
as necessitate that those bodies make added expenditures for the provision of public
services to protect the health, safety, and welfare of their populace. Statements made by
proponents of the impact fee provisions of Act 13 during these debates highlight the fact
that the impact fee was specifically intended to enable local municipalities to ameliorate
these effects.
As then-Representative now Speaker Turzai, a leading sponsor of this measure,
eloquently observed:
Through the impact fee, in the first year alone, $190 million is
going to be taken and returned to our local communities for
the impacts that occur. By year 5, it will be $400 million
annually. And in the first 10 years, it is $3 billion.
* * *
Impact fees generally, and this one in particular, are used to
provide for a number of uncompensated costs currently being
absorbed by local communities in the State. These include
the ability to fund upgrades to affected roads and bridges,
water and sewer systems, which are being strained,
admittedly by increased usage.
* * *
Another important feature tied to the impacts is the fact that
as the price of natural gas rises, this will likely equal additional
drilling, which will, in turn, mean higher impacts to address.
So there should be more revenues to address those higher
impacts. The sliding-scale approach, based on the per Mcf
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(1,000 cubic feet) development of the natural gas, is a
commonsense mechanism. It is still an impact fee
nonetheless.
It is also important to note that impact fees differ in that they
are historically authorized through a State’s authority to
protect the health, welfare, and safety of its citizens, and that
is exactly what we are doing in this prime legislation. The
impact fee we are addressing is designed to provide for
infrastructure improvements based upon direct impacts,
which have created a strain throughout the State, and to
provide services that are vital to the health, welfare, and safety
of each and every Pennsylvania citizen.
House Legislative Journal 210-11 (Feb. 8, 2012); see also id. at 208 (Remarks by
Representative Reed, a cosponsor of Act 13) (noting that the first key component of the
conference committee report which became Act 13 was the impact fee “that over the next
decade will bring $3 billion to our local communities across this Commonwealth to offset
the impacts of the industry on our citizens” (emphasis added)).21 22
21 It is for this reason that we must reject Appellees’ argument that, because Chapter 23
imposes monetary and other penalties for non-payment of an impact fee assessment, it
is a penal statute which must be strictly construed. The penalty provisions of Chapter 23,
58 Pa.C.S. §§ 2308–2310, are imposed only if a producer fails to pay the required impact
fee. Inasmuch as the chief purpose of the impact fee provisions of Chapter 23 is to help
municipalities offset the adverse effects of the production of natural gas from
unconventional wells within their borders, these provisions are remedial in nature.
Because the separate penalty provisions are merely the means by which these remedial
measures are enforced, strict construction of the impact fee provisions is not required.
See O’Rourke, 778 A.2d at 1203 n. 11 (penalty provisions for violations of the
Whistleblower Law did not render the law penal in nature, due to the fact that they were
“secondary to — and supportive of — the primary purpose of the statute” which was
remedial); see generally Verona v. Schenley Farms Co., 167 A. 317, 320 (Pa. 1933)
(“[T]here is no impropriety in putting a literal construction on a penal clause, and a liberal
construction on a remedial clause in the same statute.”).
22 In our review of this legislative history, we do not find the change in language from “a
calendar year” in the earlier versions of this legislation defining a “nonproducing well” to
“any calendar month” in the final version defining a “stripper well,” see supra note 17,
probative of the General Assembly’s intent, due to the lack of accompanying
contemporaneous explanation in the committee report, and the lack of exploration of the
reason for this change in the floor debate over the final version of H.B. 1950 which
became Act 13.
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Accordingly, the General Assembly structured the impact fee in a manner to
ensure that it would provide counties and municipalities with a sufficient revenue stream
to meet their additional drilling-related needs by making these governmental entities the
primary recipients of the monies the PUC collects through the fee. As noted by the PUC,
counties and municipalities are entitled to the largest portion of the monies which this fee
generates, given that they are allocated 60% of the revenues paid by producers into the
Fund, and they are the entities designated to receive the largest percentage share of any
remainder funds transferred from the Fund to the Marcellus Legacy Fund. 58 Pa.C.S. §§
2314 & 2315. The overarching legislative purpose of assuring that counties and
municipalities will be able to rectify the adverse consequences of unconventional drilling
activities within their communities is further evidenced by the fact that the General
Assembly specifically restricted the use of these funds to “purposes associated with
natural gas production from unconventional gas wells,” 58 Pa.C.S. § 2314(g), thereby
safeguarding against their depletion for unrelated purposes.
Consequently, given the evident intent of the legislature that the impact fee provide
an adequate and stable source of revenue for counties and municipalities to offset the
adverse effects of unconventional gas well production, which, as the PUC highlights, are
omnipresent and do not vary with the fluctuations in well production, see PUC Brief at 19-
20, a construction which best effectuates this purpose is favored. Thus, an interpretation
of “any calendar month” in the definition of a stripper well, as incorporated into the
definition of “vertical gas well,” to mean “each and every” calendar month during the
reporting year is most consonant with this purpose, as it relieves producers of the
obligation to pay the fee only if their well or wells produce 90,000 cubic feet per day or
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less of natural gas for each and every calendar month of the year.23 As the PUC argues,
this will result in more producers paying the impact fee — exactly what the General
Assembly intended. See generally PUC Brief at 26 (characterizing the overall legislative
intent in enacting the stripper well provisions of Act 13 as “to capture more wells and
fees”).
Second, this construction is consistent with the overall legislative design of the
provisions of Act 13 governing when other types of unconventional gas wells, namely,
“nonproducing unconventional gas wells” and “restimulated unconventional gas wells,”
are subject to assessment of an impact fee.24 As we have previously emphasized,
“[w]hen construing one section of a statute, courts must read that section not by itself, but
with reference to, and in light of, the other sections.” Trust Under Agreement of Taylor,
164 A.3d at 1155. Stated another way, “[s]tatutory language must be read in context,
‘together and in conjunction’ with the remaining statutory language.” Id; see also 1
Pa.C.S. § 1922(2) (presuming that the “General Assembly intends the entire statute to be
effective and certain.”). Thus, we must read all of the impact fee assessment provisions
23 This phraseology follows the manner in which the PUC has framed its argument: that,
to be exempt from the impact fee, a well must qualify as a stripper well for each and every
month of the reporting year. Of course, given the dual nature of the definitions at issue,
the converse of this proposition is also true: a well is not a stripper well, and thus not
exempt from the impact fee, if it produces more than 90,000 cubic feet per day for even
one calendar month of the year.
24 The parties are correct that the Commonwealth Court erroneously interpreted Act 13
in finding that a restimulated natural gas well is subject to a different type of impact fee
than that imposed on other unconventional wells. Quite plainly, Act 13 imposes no
separate and unique “restimulated unconventional gas well fee,” nor does it authorize the
imposition of a separate and unique “nonproducing unconventional gas well fee.” Rather,
Section 2301 defines only one type of fee which is assessed under Act 13. See 58
Pa.C.S. § 2301 (defining “fee” as “[t]he unconventional gas well fee imposed under
Section 2302 (relating to unconventional gas well fee); see also House Legislative Journal
206 (Feb. 8, 2012) (Remarks of Representative Ellis, a cosponsor of Act 13) (explaining
that a restimulated well is subject to the same impact fee as other unconventional wells
based on the 90,000 cubic foot a day production level).
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set forth in Section 2302 in conjunction with one another and strive to give effect to all of
them. Allegheny Sportsmen’s League v. Rendell, 860 A.2d 10, 18 (Pa. 2004).
Section 2302(b.1), governing “nonproducing unconventional gas wells,” provides
that if a well which has begun paying the impact fee is capped, or “does not produce
natural gas in quantities greater than that of a stripper well within two years after paying
the initial fee, then the fee shall be suspended.” 58 Pa.C.S. § 2302(b.1). However, it also
specifies that “[t]he fee shall be reinstated for a calendar year during which the
unconventional gas well produces natural gas in quantities greater than that of a stripper
well.” Id. § 2302(b.1)(1). Thus, this statutory language, and the use of the phrase “during
which,” mandates payment of the impact fee for any nonproducing unconventional gas
well whenever at some point during a calendar year it produces natural gas in quantities
greater than a stripper well, which means, as discussed above, producing “more than
90,000 cubic feet of gas per day during any calendar month.” Therefore, we interpret this
section as establishing that a nonproducing unconventional well will meet this criteria,
and thus be required to pay the impact fee, if it produces more than 90,000 cubic feet of
gas per day at any point during the calendar year, even if it is only for one month. This
supports a conclusion that the legislature intended that an impact fee is due and payable
whenever any unconventional gas well produces more than 90,000 cubic feet per day of
natural gas for even one month of a calendar year.
Likewise, the manner in which an impact fee is imposed for a restimulated
unconventional gas well supports this construction. Section 2302(d),25 setting forth the
25 This statutory section provides:
(d) Restimulated unconventional gas wells.--
(1) An unconventional gas well which after
restimulation qualifies as a stripper well shall not be
subject to this subsection.
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manner of calculating impact fees for such wells, provides that, if an unconventional gas
well, which was drilled more than 10 years ago and was producing natural gas in a volume
less than that of a stripper well, is restimulated26 and, as a result, experiences a
“substantial increase in production” — defined as “amounting to more than 90,000 cubic
feet of gas per day during a calendar month”— it becomes subject to assessment of the
impact fee. 58 Pa.C.S. § 2302(d)(2), (3) (emphasis added). Thus, under this provision,
a restimulated unconventional gas well will be subject to the imposition of an impact fee
whenever it exceeds 90,000 cubic feet a day of natural gas production for even a single
calendar month. Our construction, therefore, renders all of the provisions of Act 13
governing the imposition of impact fees on various types of unconventional gas wells
harmonious with one another.
Third, this construction is in accord with the PUC’s interpretation of the relevant
statutory language set forth in its prior administrative orders. See 1 Pa.C.S. § 1921(c)(8)
(2) The year in which the restimulation occurs shall be
considered the first year of spudding for purposes of
imposing the fee under this section if:
(i) a producer restimulates a previously
stimulated unconventional gas well following the
tenth year after being spud by:
(A) hydraulic fracture treatments;
(B) using additional multilateral well
bores;
(C) drilling deeper into an unconventional
formation; or
(D) other techniques to expose more of
the formation to the well bore; and
(ii) the restimulation results in a substantial
increase in production.
(3) As used in this subsection, the term “substantial
increase in production” means an increase in
production amounting to more than 90,000 cubic feet
of gas per day during a calendar month.
58 Pa.C.S. § 2302(d).
26 Restimulation may be achieved via the fracking process or the drilling of additional
multilateral well bores from a single vertical well bore, as discussed supra.
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(interpretations of statutory language by the administrative agency tasked with its
implementation may be considered in construing its meaning). Herein, the PUC has
faithfully adhered to its construction since it was first called upon in 2012 to interpret the
impact fee provisions of Act 13 in response to inquiries and comments from natural gas
producers.
In a Reconsideration Order issued in July 2012, disposing of a reconsideration
petition filed by producers regarding the PUC’s treatment of vertical gas wells in an Initial
Tentative Implementation Order promulgated earlier that year, the PUC noted:
[A] vertical gas well derives its status based on production
levels. These production levels are determined per day
during any calendar month. If a vertical gas well qualifies as
such, via production levels, during any calendar month in a
calendar year, that well will be subject to the impact fee.
PUC Reconsideration Order, 7/19/12, at 4.
Once more, in December 2012, the PUC again addressed the subject of when a
vertical well is subject to assessment of an impact fee, this time in response to queries
regarding a well that is “spud,” or first drilled, in a particular calendar year, but later
plugged during that same year. In a Clarification Order, the PUC stated:
In the case of a vertical unconventional gas well, the fee is
triggered and accrues at the moment the well meets minimum
production criteria in a given calendar year. If a vertical well
is later plugged during a year in which it had met that minimum
production level, the fee is nonetheless payable since it had
accrued upon that well meeting the production criteria set
forth in Section 2301.
PUC Clarification Order, 12/20/12, at 9 (emphasis original).
Almost a year later, the PUC reiterated the same principle, yet again, in a Proposed
Rulemaking Order:
[V]ertical gas wells derive their status based on production
levels. Those production levels are determined per day
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during any calendar month. 58 Pa.C.S. § 2301. If a vertical
gas well qualifies as a vertical gas well, via production levels,
during any calendar month in a calendar year, that well will be
subject to the impact fee. 58 Pa.C.S §§ 2301, 2392(f).
In order for the Commission to determine whether a vertical
gas well is subject to the impact fee, producers must verify
certain production information for the corresponding reporting
year to the Commission to ensure that a particular well
qualifies as a vertical gas well and is therefore subject to the
fee. All vertical gas wells on the Department of Environmental
Protection’s (DEP) spud list as of December 31 of each year
will be subject to the fee for that year unless the producer
verifies to the Commission that a particular well did not
produce natural gas in quantities greater than that of a stripper
well during any calendar month in the reporting year. This
means that even if a vertical gas well produces natural gas in
quantities greater than that of a stripper well in only one month
of a calendar year, that vertical well will be subject to the fee
for that year. Producers must verify on their annual producer
report forms filed with the Commission, by April 1 of each
year, certain production level information for all vertical gas
wells for which a fee is not due.
Proposed Rulemaking Order, 10/17/13, at 7-8 (emphasis original) (internal citations and
footnotes omitted).27
Moreover, the PUC has advanced sound policy reasons supporting its
interpretation which were accorded no weight by the Commonwealth Court.28 The PUC
concluded that, if a producer were able to avoid paying the impact fee for a vertical well
based solely on one month during which its output fell to that of a stripper well, this would
be an incentive for producers to manipulate a well’s production to avoid payment of the
27 Because these interpretations are long standing from the date of Act 13’s enactment,
February 14. 2012, we reject Appellees’ assertion that they were developed in anticipation
of litigation, and, hence entitled to no deference.
28 To the concern raised by our learned colleague, Justice Wecht, that “[t]he only relevant
policy-based concern entertained by a court engaging in statutory (as distinct from
common law) construction is the policy evinced by the statute,” Concurring Opinion
(Wecht, J.) at 9, as we note below, our policy discussion is appropriately tethered to our
legislature’s allowance under the SCA to consider, inter alia, the consequences of a
particular interpretation when construing a statute. See 1 Pa.C.S. § 1921(6).
[J-23A-2018 and J-23B-2018] - 38
impact fee. To be clear, there is no indication in the record that SBI engaged in this kind
of behavior. Nonetheless, we defer to the PUC’s judgment that, as a general matter, this
is a legitimate administrative concern.
Indeed, the record in this matter furnishes support for the PUC’s conclusion that
varying a well’s production is an ability its operator possesses. As acknowledged by SBI’s
Vice President, reductions in well output are within the operator’s control, and they may
occur as the result of something as benign as routine maintenance activities. N.T. ALJ
Hearing, 12/4/14, at 84. Consequently, the PUC’s interpretation ensures stability in the
impact fee assessment process. The contrary interpretation advanced by Appellees
would lead to an unreasonable result, as it would permit well operators who have enjoyed
robust production from their wells for the majority of a calendar year to avoid paying the
impact fees to the municipalities merely because of the happenstance of one month’s
diminished production. See 1 Pa.C.S. § 1921(6) (the consequences of a particular
interpretation may be considered in any statutory construction analysis); 1 Pa.C.S. §
1922(1) (the legislature “does not intend a result that is absurd, impossible of execution
or unreasonable.”). Moreover, such an interpretation would impermissibly favor the
private financial interests of producers over the public interest of counties and
municipalities in having sufficient fiscal capabilities to protect their residents from the
deleterious effects of unconventional drilling activities. This would contravene the SCA’s
presumption that the intent of the General Assembly in enacting legislation is “to favor the
public interest as against any private interest.” Vitac Corporation v. W.C.A.B. (Rozanc),
854 A.2d 481, 485 (Pa. 2004) (quoting 1 Pa.C.S. § 1922(5)). It was, therefore, error for
the Commonwealth Court to summarily disregard the PUC’s interpretation. See Alpha
Auto Sales v. Department of State, 644 A.2d 153, 155 (Pa. 1994) (holding that because
the administrative agency had rendered “a sensible construction of the statute in question
[J-23A-2018 and J-23B-2018] - 39
supported by cogent policy considerations,” it was error for the Commonwealth Court to
ignore it).
In conclusion, for all of the aforementioned reasons, we hold that, under Act 13,
an unconventional vertical well is a “vertical gas well” subject to assessment of an impact
fee for a calendar year whenever that well’s natural gas production exceeds 90,000 cubic
feet per day in at least one calendar month of that year. Because it is undisputed that the
wells at issue in this case met this criteria, we reverse the order of the Commonwealth
Court which set aside the PUC’s assessment to SBI of impact fees for the 2011 and 2012
reporting years.
Order reversed. Jurisdiction relinquished.29
Chief Justice Saylor and Justices Donohue and Dougherty join the opinion.
Justice Wecht files a concurring opinion in which Justice Baer joins.
Justice Mundy files a dissenting opinion.
29 PIOGA has filed a motion with our Court requesting that we strike portions of the PUC’s
reply brief, which it contends are merely the PUC’s repetition of the arguments made in
its initial brief regarding why the impact fee provisions are not a tax, and, thus, are in
violation of Pa.R.A.P. 2113(a). PIOGA also seeks leave to file a proffered sur-reply brief
addressing two matters: First, PIOGA desires to respond to an argument the PUC made
in its reply brief pertaining to public comments it solicited from interested parties, such as
producers and municipalities, regarding the definition of stripper well, which the PUC
argued in its reply brief supported its interpretation. PIOGA contends that these
comments did not address the meaning of the term “any” in the stripper well definition,
and, hence, are irrelevant for interpretative purposes. Second, PIOGA seeks to respond
to the PUC’s contention that it would be “laborious and expensive,” PUC Reply Brief at
12, to investigate each unconventional well to see if it was incapable of producing 90,000
cubic feet a day, an assertion it claims is unsupported by the record. We grant PIOGA’s
motion with respect to both matters.
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