SNYDER BROTHERS, INC. v. PENNSYLVANIA PUBLIC UTILITY COMMISSION; PENNSYLVANIA INDEPENDENT OIL & GAS ASSOCIATION v. PENNSYLVANIA PUBLIC UTILITY COMMISSION
No. 47 WAP 2017; No. 48 WAP 2017
IN THE SUPREME COURT OF PENNSYLVANIA WESTERN DISTRICT
DECEMBER 28, 2018
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
ARGUED: April 11, 2018
Appeal from the Order of the Commonwealth Court entered March 29, 2017 at No. 1175 CD 2015, reversing the Order of the Public Utility Commission entered June 11, 2015 at No. C-2014-2402746
ARGUED: April 11, 2018
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
I. Background
An unconventional natural gas well is defined by
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.
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
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.
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
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.
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.
- Construction, reconstruction, maintenance and repair of roadways, bridges and public infrastructure.
- Water, storm water and sewer systems, including construction, reconstruction, maintenance and repair.
- Emergency preparedness and public safety, including law enforcement and fire services, hazardous material response, 911, equipment acquisition and other services.
- Environmental programs, including trails, parks and recreation, open space, flood plain management, conservation districts and agricultural preservation.
- Preservation and reclamation of surface and subsurface waters and water supplies.
- Tax reductions, including homestead exclusions.
- Projects to increase the availability of safe and affordable housing to residents.
- Records management, geographic information systems and information technology.
- The delivery of social services.
- Judicial services.
- 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.
- Career and technical centers for training of workers in the oil and gas industry.
- Local or regional planning initiatives under the act of July 31, 1968 (P.L. 805, No. 247), known as the Pennsylvania Municipalities Planning Code.
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.”
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
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
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
The PUC, applying the canons of statutory construction in
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
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.
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
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
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
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
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
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
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
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
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.
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
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
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
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
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
- The occasion and necessity for the statute.
- The circumstances under which it was enacted.
- The mischief to be remedied.
The object to be attained. - The former law, if any, including other statutes upon the same or similar subjects.
- The consequences of a particular interpretation.
- The contemporaneous legislative history.
- Legislative and administrative interpretations of such statute.
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.”
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
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.”
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
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
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.
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
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
(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)).2122
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
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
Likewise, the manner in which an impact fee is imposed for a restimulated unconventional gas well supports this construction.
Third, this construction is in accord with the PUC‘s interpretation of the relevant statutory language set forth in its prior administrative orders. See
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
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
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
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.
Notes
(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.
(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.