Thursday, August 23, 2018

Senate, House Republicans Want Taxpayers, Not Drilling Industry, To Pay Additional Costs For DEP Oil & Gas Regulatory Program

Senate and House Republicans have asked the Department of Environmental Protection to use General Fund (general taxpayer money) to, for the first time, pay the additional cost of operating its oil and gas drilling regulatory program, rather than increase fees on drilling permits.
A combination of permit fees paid by drillers and an allocation from the drilling impact fee paid by drillers have funded DEP’s oil and gas regulatory program since 2012, as directed by Act 13.
In an August 10 letter to DEP Secretary Patrick McDonnell, 32 House Republicans expressed their opposition to DEP’s proposal to increase unconventional drilling permit fees from $5,000 to $12,500 to pay the administrative costs of the current program.
The letter says DEP failed to decrease permit review times and has not taken steps to adopt “efficiencies” in the program, adding the unconventional drilling industry faces “significant financial challenges.”
[Note: DEP’s background information on the financial condition of the Oil and Gas Program notes the agency has already reduced operating costs by 38 percent by introducing a number of efficiencies in the current program, including electronic inspection reports.
[DEP said the need for additional revenue is caused by a significant reduction in the number of unconventional drilling permits coming to the agency for review which directly affects revenue for the program.
[In January DEP announced a series of oil and gas permitting reforms, some of which would require legislative changes, which have not been acted on by the General Assembly.]
The House letter goes on to “strongly recommend that the department supplement a reasonable amount of the costs to run its oil and gas program from its current General Fund appropriation.”
[Note: The General Assembly and Governors have cut DEP’s General Fund appropriations by 40 percent over the last decade causing DEP to cut its staff positions by nearly 30 percent.
[As a result, DEP has had to increase permit review fees on those it regulates in ALL of its programs to make up for lost General Fund appropriations to insure stable funding for these programs and, in many cases, to meet minimum federal standards.]
A letter similar to the one sent by House Republicans was sent to DEP by 14 Senate Republicans on August 20 making identical arguments opposing the drilling permit fee increase .
The Senate letter also recommended DEP “provide General Fund [taxpayer funded] appropriations to supplement costs to run the Oil and Gas Program.  The Department can and should consider providing a General Fund appropriation to this Program before considering raising fees.”
[Note: Act 13 passed by the General Assembly in 2012 requires the Environmental Quality Board to adopt a permit fee “which bears a reasonable relationship to the cost of administering this chapter.” (Section 3211 (d))
[This section of Act 13 requires the permit fee paid by drillers to underwrite the cost of administering the Oil and Gas Program.]
The comment period on DEP’s proposed increase in unconventional drilling permit fees ended on August 13.
[Note: Anyone interested in this issue should read both the House letter and the Senate letter in their entirety to get a fuller appreciation of the background they present on the fee vs. General Fund issue.]
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