Westmoreland County, Pa. to audit gas royalties - Shale Reporter : Government

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Westmoreland County, Pa. to audit gas royalties

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Posted: Monday, September 23, 2013 8:48 am

The Municipal Authority of Westmoreland County could earn up to $6.5 million this year in royalties from Marcellus shale gas drilling on its 8,000 acres.

And officials want to make sure they receive every penny they are owed.

So the authority board on Thursday hired a consultant to audit the books for the 32 deep wells, along with other gas-producing facilities, on its properties.

“We are asking to audit them to see if we are being paid correctly,” authority manager Chris Kerr said.

Royalties from gas production have been a boon for the utility, which sells water to more than 125,000 customers in five counties.

Through the first quarter of the 2013-14 fiscal year, the money received from gas royalties has outpaced expectations and has bailed the authority out of a projected revenue shortfall.

Revenues from water sales fell $750,000 short of projections for the first four months of the current fiscal year.

Meanwhile, gas royalties have been $500,000 over budget — keeping the authority’s finances near the break-even point.

With every dollar earned from alternate revenue sources sorely needed, authority officials said, they want to ensure they are getting what they are owed from natural gas drillers.

The authority will pay Litcon LLC of Pittsburgh $12,000 to do an initial review before a more comprehensive analysis is authorized of the wells owned by various companies.

“In a couple of years, we’ll hit our height and start to decline,” Kerr said of the gas royalties.

Water rates increased 25 percent this year, with about half of that hike used to balance the authority’s operating budget.

The rest of the revenue raised through the rate hike is being used to pay off $141 million borrowed for a five-year, capital-improvement program.

Officials said rates are not expected to be increased for the next several years.

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