A proposal by the Pennsylvania Department of Environmental Protection to increase unconventional drilling permit fees by 150 percent received criticism from a committee tasked with working on the state’s energy policy.
Chaired by state Sen. Gene Yaw (R-23), the Senate Environmental Resources and Energy Committee and other Senate colleagues sent a letter last Monday to DEP Secretary Patrick McDonnell, the chairman of the Environmental Quality Board.
The letter noted that the Senate Republican Caucus had voted “no” on the measure during the May Environmental Quality Board meeting.
Under the proposal, permit application fees for unconventional natural gas wells would increase form $5,000 to $12,500.
“As stated, this proposed rulemaking recommends regulatory changes to address ‘disparities’ between Oil and Gas Program income generated by the fees and the Department’s cost of administering the Oil and Gas Program to ensure compliance with the 2012 Oil and Gas Act,” the letter stated. “While the department has determined that a significant disparity exists between fee income and costs to run the program, the department fails to consider that when it comes to funding the program, the unconventional natural gas industry contributes overwhelmingly the largest percentage in funds to the department’s oil and gas budget.”
As an alternative, the lawmakers suggested that the DEP utilize $6 million in Impact Fee money to support the program and provide a general fund appropriation as it does with other programs to help support new staff and expand policy initiatives.
“While Pennsylvania already holds the top spot for having the highest permit application fees at $5,000, the proposed rulemaking … would ‘hit it out of the ballpark’ for future permit application fees at $12,500,” the letter continued. “It is our view that for the reasons stated the department should reassess their current appropriations and realign them to fit their overall needs. Increasing existing fees on an industry that is already contributing significantly to Pennsylvania’s overall economy and workforce should not be supported or considered at this time.”
In a statement submitted more than a week earlier, Marcellus Shale Coalition President David Spigelmyer said the industry understands the need to have a robust oil and gas program, as it had with other permit fee increases in 2009 and 2013. He also noted that the natural gas industry has provided $1.5 billion through the Act 13 impact fee since 2012, with $42 million benefitting the Department of Environmental Protection for oversight of the industry.
“However,” he added, “the proposed permit fee increase from the current $5,000 per unconventional well application to $12,500 per unconventional well application – representing a 150 percent increase – is excessive and not proportional to the costs incurred by the oil and gas program to oversee the unconventional natural gas industry. Additionally, excluding the department’s $6 Million Impact
Fee allocation from the oil and gas program’s operating budget seems counterintuitive to the purposes for which these revenues were intended.”
In a program cost analysis report to the Environmental Quality Board, the DEP explained that the number of well permits had decreased while inspection and administration responsibilities have increased.
“The well permit fee is paid with the permit application at the beginning of a well’s operating life; therefore, it is a one-time source of revenue that is used to fund continuing obligations,” the department explained. “A well typically remains active for decades before being plugged, during which time the cost for DEP to conduct investigations of the well site must be borne by the receipt of new drilling permit application fees. While in prior years DEP received enough oil and gas drilling permit fees to meet its basic financial needs, current permit volumes are insufficient to maintain DEP’s Office of Oil and Gas Management into the future.”
Members of the Pennsylvania House Oil and Gas Caucus have also voiced their opposition to the measure in a letter sent to the DEP earlier this month.
Local state Rep. Clint Owlett (R-68) was one of 32 House lawmakers who signed the letter.