Drilling permit fees to rise



The price for a shale well permit in Pennsylvania is about to go up so the ranks of environmental regulators can grow.

A proposal by the state Department of Environmental Protection to increase by around $1,800 the permit fee to drill an unconventional natural gas well is in the final review stages after it was approved by a regulatory oversight board this month.

The Attorney General’s office has until June 1 to review the rule, which will become effective when it is published in the Pennsylvania Bulletin.

The rule will replace the current sliding fee scale based on the length of a well bore with a flat fee of $5,000 for horizontal unconventional wells and $4,200 for vertical unconventional wells. The fee structure for conventional oil and gas wells will not change.

Marcellus Shale operators typically pay $3,200 for a horizontal well permit and $2,900 for a vertical well permit with the current scale, DEP said.

Recent laws have broadened the department’s supervision of wells, pipelines and other infrastructure associated with the growing industry so the agency has more work and new responsibilities, DEP said in documents supporting the fee change. But permit revenues that largely fund DEP’s oil and gas program have declined since 2010 as natural gas prices dropped and companies applied to drill fewer wells.

“This increase in workload coupled with declining permit revenues creates a situation where the incoming permit revenue is insufficient to cover the current operational costs of the program,” the department said in an analysis of its program budget.

Without a fee increase, the department projected the account that funds the oil and gas program would be insolvent in 2016.

DEP said the new fees will be used to hire more staff and improve information technology for things like electronic permit applications and mobile digital tools for inspectors. Right now, field staff members spend at least a day a week in the office manually entering data from paper inspection forms and then mailing the reports to operators.

During budget hearings in February, DEP Secretary E. Christopher Abruzzo said the oil and gas program will add 36 positions if the fee increase is approved.

The industry generally supports the rule. Consol Energy Inc. was the only oil and gas operator or trade group to argue against it during the public comment period, saying DEP hasn’t properly justified the need for a fee increase.

“The increasing costs associated with permitting fees and complying with regulation will continue to force operators out of the Commonwealth and into surrounding states whose policies and permitting requirements are more favorable during weak economic conditions,” the Cecil-based company wrote.

A spokesman for the Marcellus Shale Coalition, the Robinson trade group that counts Pennsylvania’s major shale operators as its members, said the industry believes it is its responsibility to ensure the state has the resources to handle the expanded workload.

The coalition backed a change in 2009 that replaced a flat $100 well permit fee with the sliding scale and it endorses this new increase as well. “We don’t believe the taxpayer should be responsible for these costs, which is why we support this change,” spokesman Patrick Creighton said in an email.

DEP expects to raise $4.8 million more annually with the higher fees.

Laura Legere: llegere@post-gazette.com

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