Local senators urge DEP to reconsider its proposed gas well permit fee hike
Several local Republican state senators indicated opposition Monday to a proposed increase on permit fees for unconventional gas wells, countering the state Department of Environmental Protection’s stance that the proposal is needed to keep managing the department’s oil and gas program properly.
Sen. Camera Bartolotta, R-Carroll Township, and Sen. Pat Stefano, R-Bullskin Township, were among the 14 senators — all Republicans — to sign a letter to state Department of Environmental Protection Chairman Patrick McDonnell urging the department to reconsider the proposed increase, which would hike the permit fee from the current $5,000 per unconventional well application to $12,500 per unconventional well application.
That would constitute a 150 percent increase, one that the senators argued would be counterproductive.
“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,” the senators wrote.
Also signing the letter were Sen. Guy Reschenthaler, R-Jefferson Hills, who is running for the new 14th Congressional District in the U.S. House of Representatives against Democratic nominee Bibiana Boerio of Unity Township, and Sen. Kim Ward, R-Hempfield Township, who represents Westmoreland County communities including West Newton and Smithton.
In their letter to McDonnell, the senators noted that permit review time frames have increased and that the DEP hasn’t indicated that processing and review times would be significantly reduced if permit fees are increased 150 percent.
That complaint echoed the Marcellus Shale Coalition (MSC) in its president’s objection to the proposed unconventional well permit fee increase, which he addressed to McDonnell earlier this month.
In its response to the proposed fee hike, coalition President David J. Spigelmyer reported that the average time to issue an unconventional natural gas permit jumped 200 percent from 2013 to 2017.
“The operators who will be required to remit a significantly higher fee under this proposal remain concerned that there are no assurances of improved permit review and issuance time frames,” Spigelmyer wrote.
But MSC’s criticisms of the proposed fee increase didn’t end there.
Spigelmyer argued that the DEP should allocate general fund appropriations to the state’s Office of Oil and Gas Management rather than rely on well permit fees, civil penalties and $6 million in impact fees for its annual allocation as it currently does.
Spigelmyer also argued that the proposed fee would be far too high compared to the fees in states that he said were competing with Pennsylvania for capital investment in oil and gas extraction such as Texas.
The unconventional well permit fee increase proposal was announced by Gov. Tom Wolf and McDonnell in January. It took 14 months for the previous regulation imposing higher permit fees to take effect after DEP first proposed it in April 2013.
The DEP has recommended that the fees for conventional wells remain unchanged.
Permit fee levels were initially set at $100 by the Oil and Gas Act of 1984 but were increased in 2009, ranging then from a flat $100 to a sliding scale based on the length of the well bore.
In June 2014, the DEP eliminated the sliding scale for unconventional operators in favor of a fixed fee of $5,000 for horizontal unconventional wells and $4,200 for vertical unconventional wells.
The DEP noted in an executive summary on unconventional well permit application fees earlier this year that it had to increase compliance inspections at well sites at unconventional and conventional well sites more than 147 percent between 2009 and 2017, particularly as the unconventional gas industry expanded greatly.
But as the DEP’s inspection and program administration responsibilities have increased, the number of well permits submitted to the department hasn’t generated enough revenue to cover the costs of administering DEP’s oil and gas program, the department warned, adding that current fiscal trends will result in a deficit in the first quarter of fiscal year 2019-20.
Well permit fees are paid once, at the start of a well’s operating life, but DEP’s well site investigations continue until the well is plugged, typically decades later.
When the unconventional well permit fee was increased in 2014, the DEP projected that a $5,000 flat fee for horizontal unconventional wells would be enough to support a full complement of 226 Oil and Gas Program staff if the department received 2,600 unconventional well permits annually.
But the DEP received just 1,646 permits in fiscal year 2015-16 and 1,993 in fiscal year 2016-17, much fewer than expected.
“At current surcharge rates and per-well plugging costs, DEP will not have any material impact on reducing the number of unplugged orphan and abandoned wells in Pennsylvania for more than 100 years,” the DEP stated in its executive summary.
There are currently 200,000 orphan and abandoned gas wells, or legacy wells, unaccounted for statewide, the DEP reported, also noting that such wells pose environmental and health risks.
The DEP noted that in light of its sustainable funding issues, it cut staff from 226 to 190 employees and slashed operating and fixed asset costs 39 percent over the past three fiscal years.
“In order to continue administering the program, fees must be increased,” the department said. “This proposed rulemaking reflects the necessary fee increase.”
With local senators on his coalition’s side, Spigelmyer disagrees.
“The department should examine and quantify the costs of the oil and gas program attributable to unconventional natural gas operations, identify operational changes to address permit delays, and fully exhaust alternate revenue options before moving forward with such a drastic permit fee increase,” Spigelmyer wrote.