The Marcellus Shale region teems with stories of surprise wealth, where oil and gas title searchers find an overlooked heir or holder of mineral rights.
Unlike those cases of found wealth through gas royalties, PPL Electric Utilities' anticipated mini-windfall may not be so cut and dried. The land that Cabot Oil & Gas Corp. found that PPL unknowingly inherited, the Northern Electric Trolley line, is disputed with competing claims. Abandoned since the 1930s, PPL's land now hosts pastures, private roads, even houses and businesses, some obtained through decades-old quiet titles.
Also, there is the question of whether PPL will have to pay property taxes on the land, as many others have for generations. Under the Pennsylvania Utility Code, revenue generated from utility-owned land or assets would defray the cost of electricity by going into the rate base. In a recent example, PPL Electric Utilities leased to businesses bandwidth on the fiber network it created between regional offices. That revenue, in a small way, helped offset electricity prices.
PPL's customers may not benefit from the new natural gas royalty stream, however, said Pennsylvania acting Consumer Advocate Tanya J. McCloskey. Since PPL didn't know it owned the land, it was never included in its rate base.
"Typically, royalties or any revenue derived from utility land or assets should offset electricity rates," she said. "But it's unclear weather ratepayers ever paid for that land and it doesn't appear to ever have been in use to serve ratepayers."
So PPL's natural gas royalties would go directly to corporate coffers.
In addition to a legal tangle of quiet titles and rights of way, the utility may have some cost associated with its mini-windfall.
Utility property used in the generation, transmission or distribution of electricity falls under a specialty tax known as PURTA, the Public Utility Real Estate Tax Act, said Doug Hill, executive director of the Assessors Association of Pennsylvania. PURTA is funded by utilities and the money distributed to taxing bodies. But undeveloped land not being used by the utility is another story.
"Normally, land like that doesn't quality for an exemption, nor does it fall under a specialty tax," Mr. Hill said. "But I'm not familiar with the latest case law, and that could change on the fringes."
If property taxes are to be left on the table, Susquehanna County assessors aren't aware of it.
Tom Button, Susquehanna County chief assessor, said he is not aware of PPL's ownership of the property and is not sure what the taxable status would be since the land is owned by a utility, even if it is not being used to fulfill its utility role.
But, PPL is ready to pay property taxes on the old Northern Electric line, starting this year.
"We acknowledge and expect to pay property taxes going forward," said PPL spokesman Michael Wood.
However, when the owner of an abandoned property is identified, taxing bodies are permitted to collect several years of back taxes, said William "Chip" Mackrides, a Pennsylvania State Bar Association real estate specialist.
"A sophisticated county solicitor would be able to approach PPL and say, 'Hey, you are making money from this land; it has a value. Let's work something out that's reasonable for everyone,' " Mr. Mackrides said.
For now, PPL is not making much from its newfound land. Cabot is putting any royalties from the disputed property in escrow pending a resolution.
Contact the writer: dfalchek@timesshamrock.com