Snyder Bros., Inc. v. Pa. Pub. Util. Comm'n

• Decision Date: 06 February 2020
• Docket Number: No. 1043 C.D. 2015,1043 C.D. 2015
• Parties: Snyder Brothers, Inc., Petitioner v. Pennsylvania Public Utility Commission, Respondent
• Court: Pennsylvania Commonwealth Court

Snyder Brothers, Inc., Petitioner v. Pennsylvania Public Utility Commission, Respondent

No. 1043 C.D. 2015

COMMONWEALTH COURT OF PENNSYLVANIA

Argued: October 4, 2019

February 6, 2020

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE MICHAEL H. WOJCIK, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY JUDGE McCULLOUGH

This matter comes to us on remand from the Supreme Court in Snyder Brothers, Inc. v. Pennsylvania Public Utility Commission, 198 A.3d 1056 (Pa. 2018), order amended on reconsideration, 203 A.3d 964 (Pa. 2019) (Snyder II), which reversed the decision of this Court in Snyder Brothers, Inc. v. Pennsylvania Public Utility Commission, 157 A.3d 1018 (Pa. Cmwlth. 2017) (en banc) (Snyder I).

By way of background, on January 17, 2014, the Bureau of Investigation and Enforcement (I&E)¹ filed a complaint, alleging that Snyder Brothers, Inc. (SBI)did not properly identify and pay impact fees on 24 wells in 2011 and 21 wells in 2012. After reviewing SBI's annual well production reports for calendar years 2011 and 2012, I&E determined that SBI failed to report these 45 wells as "vertical wells," which are subject to an impact fee under the Pennsylvania Oil and Gas Act, a statute commonly known as Act 13.² In its complaint, I&E sought $507,586.00 in past due impact and administrative fees, plus penalties and interest, and also requested that SBI be ordered to pay an additional penalty of $50,000.00. SBI filed an answer and new matter, asserting that the wells at issue were "stripper wells," not "vertical wells," and were thus exempt from the impact fee.³ In his decision, the ALJdetermined that the definition of "stripper well" was ambiguous but, applying the statutory construction factors for ascertaining legislative intent, concluded that SBI was operating "vertical wells" and therefore violated Act 13. Besides ordering SBI to pay past due impact fees, the ALJ also awarded: (1) interest under section 2308(a) of Act 13, 58 Pa.C.S. §2308(a),⁴ and accepted I&E's proposed 3% interest rate as reasonable; (2) a seemingly mandatory penalty under section 2308(b) of Act 13, 58Pa.C.S. §2308(b),⁵ at the 25% maximum rate; and (3) a discretionary civil penalty in the amount of $50,000.00 under section 2310(a) of Act 13, 58 Pa.C.S. §2310(a).⁶

In a decision dated June 11, 2015, the Commission upheld the ALJ's determination that SBI operated 45 "vertical wells." The Commission concluded that the ALJ did not err in finding that SBI violated Act 13 by not paying impact fees on these wells and that the imposition of interest and penalties was mandatory pursuant to section 2308(a) and (b) of Act 13. However, the Commission agreed with SBI that a discretionary civil penalty was not warranted under the facts and circumstances of this case and granted its exceptions related to that issue. (Commission's decision at 43-67.) Ultimately, the Commission "ordered SBI to pay [$390,250.00] 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[.00]" Snyder II, 198 A.3d at 1063. The Commission further ordered that, within 20 days of its decision, SBI "shall remit $499,520[.00] payable by certified check or money order to 'Commonwealth of Pennsylvania' and sent to [the PUC]." (Commission's decision at 69-70.)

SBI then appealed to this Court, arguing that a plain language analysis and/or proper application of statutory construction factors leads to the conclusion thatit was operating "stripper wells." In Snyder I, a majority of this Court agreed with SBI and reversed "the Commission's conclusion that SBI violated Act 13 and owed impact fees for improperly listed stripper wells. With there being no violation of Act 13, we also reversed the Commission's imposition of interest and penalties on SBI." Snyder I, 157 A.3d at 1031. See supra note 2.

On further appeal in Snyder II, our Supreme Court, in an opinion and order dated December 28, 2018, reversed this Court and reinstated the Commission's order. In so deciding, the Supreme Court concluded that, although the term "stripper well" was facially ambiguous, its resort to the statutory construction factors supported the conclusion that SBI was, in fact, operating "vertical wells" and was mandated under Act 13 to pay impact fees for those wells. See supra note 2. Therefore, the Supreme Court reversed this Court's order "set[ting] aside the [Commission's] assessment to SBI of impact fees for the 2011 and 2012 reporting years" and relinquished jurisdiction. Snyder II, 198 A.3d at 1079.

Thereafter, SBI filed a motion for reconsideration, which our Supreme Court granted on March 7, 2019. In so doing, the Supreme Court amended its opinion and order in Snyder II "such that this matter is REMANDED to the Commonwealth Court to address [SBI's] outstanding appellate issues before that court." Snyder Brothers, Inc. v. Pennsylvania Public Utility Commission, 203 A.3d 964, 964 (Pa. 2019) (emphasis in original).

Discussion

On remand to this Court, the outstanding issues advanced by SBI concern the propriety of the Commission's imposition of interest and a penalty under section 2308 of Act 13, 58 Pa.C.S. §2308. In general, SBI contends that (1) thestatutory procedure and provisions authorizing the imposition of interest and a penalty violate procedural due process; and (2) the representations and conduct of the Commission, as well as the directives as stated in Commission's October 17, 2013 Proposed Rulemaking Order, deprived it of fair notice that interest and a penalty would be assessed. Finding merit in these two arguments, we reverse the Commission on separate and independent grounds.⁷

With respect to the present issues that SBI raises before this Court, the Commission set forth the following pertinent findings of fact in its June 11, 2015 decision:

On August 15, 2012, SBI submitted to the Commission an Annual Report for the year 2011 as required by Act 13. The 2011 Annual Report listed each well operated by SBI that was potentially subject to the administrative and impact fees imposed by Act 13. SBI's annual report accurately set forth the total gas produced by each well in each month of the 2011 reporting period.

On August 29, 2012, SBI received a 2011 Impact Fee Statement from the Commission stating that SBI owed impact fees in the amount of $170,000[.00] for the period January 1, 2011, through December 31, 2011, based upon production from seventeen vertical gas wells. Additionally, on August 29, 2012, SBI received a 2011 Spud Fee Statement from the Commission stating that it owed administrative fees in the amount of $850[.00] for [17] wells. On August 30, 2012, SBI paid the Commission the amounts stated on the 2011 Impact Fee and Spud Fee Statements.

On March 27, 2013, SBI submitted to the Commission an annual report for the year 2012. The 2012 annual report listed each well operated by SBI that was potentially subject to the spud and impact fees imposed by Act 13 for the 2012 reporting period. In its 2012 annual report, which accurately set forth the production for each well for the 2012 reporting period, SBI stated that it operated [28] vertical gas wells for which spud and impact fees were due.

In an e-mail dated April 12, 2013, an employee of the Commission's Bureau of Administration stated that a vertical well is not a stripper well, as defined in Section 2301 of Act 13, if it has reported production in excess of 90,000 cf in any one month of a reporting period. In response, SBI advised the Commission that it disagreed with the Commission's interpretation and stated that each well listed as a stripper well in the 2011 and 2012 annual reports qualified as stripper wells by virtue of the reported monthly production histories for each year.

On April 8, 2013, SBI received the 2012 Impact Fee Statement from the Commission stating that SBI owed impact fees in the amount of $236,000[.00] for 2012. In addition, SBI received a Spud Fee Statement for 2012 in the amount of $1,400[.00].

(Commission's decision at 6-8) (internal citations and footnotes omitted).

The Commission continued to explain that

[t]he 2012 Impact Fee Statement provided that the impact fee for forty-nine vertical gas wells was $409,000.[00]. However, the Commission subtracted the impact fees for [21] disputed vertical gas wells in the amount of $173,000.[00]. Thus, the 2012 Impact Fee Statement listed the amount owed as $236,000 based on [28] vertical wells . . . .

Id. at 8 n.8.

After confirming that "SBI paid the impact and spud fees identified in the 2012 statements," id. at 8, the Commission then stated:

On October 17, 2013, the Commission issued its Proposed Rulemaking Order.⁸ In pertinent part, the order states that "[i]f a producer is disputing whether a particular well is subject to the impact fee, the producer should not pay the corresponding impact fee for the disputed well unless and until the dispute has been resolved." [Proposed Rulemaking Order] at 16-17. The order further states that, in the event that there is a dispute, and "[f]ollowing the adjudicatory proceeding before the [ALJ], the Commission will issue a [f]inal [o]rder regarding the matter" and "may assess interest and penalties on untimely or delinquent impact fee payments . . . if . . . the Commission sustains the amount due by [the] final order." [Proposed Rulemaking Order] at 17-18.

During the hearing [before the ALJ], I&E presented the testimony of a Commission witness who explained that after receiving SBI's 2012 annual report on March 27, 2013, the witness realized that SBI and the Commission interpreted the term "vertical well" differently. The witness later calculated that SBI owed a total of $241,200[.00] in impact and spud fees for 2011 based upon production from an additional [24] wells. For 2012, the witness calculated that SBI owed a total of $149,050[.00] in impact and spud fees for 2012 based upon production

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