Senate's severance tax bill makes major changes to Marcellus Shale permitting

To make a new severance tax on natural gas production less odious to Pennsylvania’s shale drillers, the state Senate is offering them a few things they want: clearer permit turnaround times and a new hurdle for regulators who want to implement stricter controls on methane emissions from well sites.

The severance tax passed by the Republican-led Senate on Thursday varies based on the previous year’s average annual price of natural gas — from a minimum of 1.5 cents per thousand cubic feet (mcf) to a maximum of 3.5 cents per mcf.

This year’s tax would be 2 cents per mcf, which is expected to raise $100 million on top of the roughly $200 million in impact fees that companies pay annually based on the number of wells they drill.

In exchange, the Senate’s tax bill would allow any permit related to unconventional oil and gas development to be deemed approved if the state Department of Environmental Protection has not acted on it within timeframes established by the Legislature: 30 days for a general air permit, 45 days for a well permit and 53 business days for an earthmoving permit. Other deadlines are shorter for expedited permit applications and longer for reviews extended for cause.

Pennsylvania environmental regulators have been criticized for years over delays in issuing permits for earthmoving activities at oil and gas sites.

Senate Majority Leader Jake Corman, R-Centre, said on the Senate floor Thursday that the permitting changes coupled with the severance tax are “significant regulatory reforms, which will help the employers in that area significantly.”

The changes outraged environmental advocates while doing little to mollify the Marcellus Shale industry.

“Our industry remains opposed to additional energy taxes,” Marcellus Shale Coalition President David Spigelmyer said.

In a statement, he said the severance tax, plus a proposal to impose a 5.7 percent tax on natural gas bills, would burden energy producers and consumers and would cost jobs.

Pennsylvania Chamber of Business and Industry President Gene Barr said the Senate’s revenue package would tax natural gas four times over its life from drilling to use.

Other environmental permitting changes in the budget bills that the Senate passed Thursday include the establishment of a new air quality permit advisory committee with the power to reject permits that DEP is designing to limit methane emissions from new shale gas well sites and associated infrastructure.

The provision also forbids the department from applying new methane permitting requirements to existing natural gas wells.

The permits are intended to minimize leaks of the powerful greenhouse gas from shale operations.

Separately, the Senate tax bill directs DEP to establish a program to deputize permit reviews of all kinds to private, licensed contractors. The contractors will be responsible for issuing permits if the DEP hasn’t issued them within 30 days or other established timelines.

A permit applicant will be allowed to select its permit reviewer from a list of DEP-approved contractors. The outside reviewers would receive the permit fees from the applications they analyze.

The Pennsylvania Environmental Council implored legislators to reject the changes concerning methane permits and third-party reviewers. “These drastic amendments are ill-advised, and likely violate both federal law and our state’s constitution,” the statewide environmental organization said.

David Hess, a former DEP secretary and now a lobbyist with environmental clients, said the bills strip the state department of its ability to regulate an array of industries and perform its basic mission.

“These changes are an insult to every man and woman working at the Department of Environmental Protection,” he said.

The House, whose GOP majority has been more severance tax-averse than the Senate, still has to consider the changes before they can be sent to the governor.

A spokesman for Democratic Gov. Tom Wolf said DEP is reviewing the legislation.

“Regardless of any potential changes, they are resolute in their responsibility to protect our water and air,” Mark Nicastre said, adding that the department is “committed to ensuring that there are predictable and fair processes in place for the industry.”

Laura Legere:

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