IRRC Unanimously Approves EQB Regulation Increasing The Unconventional Gas Well Drilling Permit Application Fee

On June 18, the Independent Regulatory Review Commission unanimously approved the EQB final regulation increasing the unconventional natural gas well drilling application fee.

The fee will increase from $5,000 for nonvertical unconventional wells and $4,200 for vertical unconventional wells, to $12,500 for all unconventional well permit applications to administer the 2012 Oil and Gas Act.

DEP first started to develop this regulation in February 2018 with the Oil and Gas Technical Advisory Board-- over two and a half years ago.

The revenue projections done for the regulation were based on DEP receiving 2,000 permits a year and over the last 18 months those applications have dropped off significantly primarily due to natural gas market conditions.

From January 1 to April 17, DEP received 385 unconventional gas well permit applications.

DEP said in its background documents on the fee increase--

“Since the last unconventional well permit application fee increase in 2014, well permit application fees have not generated the revenue needed to fund Program costs because of declining unconventional well permit application numbers.

“Nonetheless, the Program’s workload has increased due to the additional well inventory, development activity, and the need for guidance and technical tools to stay current with industry environmental standards.

“As a result of declining unconventional well permit application fee revenues, the Oil and Gas Program reduced staff over time from 226 employees to 190 employees today.

“The Oil and Gas Program also reduced operating costs by 38 percent. Operating expenses only account for approximately 10 percent of total program costs, therefore any future cost savings would primarily come from a reduction in staff.

“At the current disparity between fee revenues and expenditures, the Oil and Gas Program would need to reduce its complement by over 100 additional positions to continue administering the Program.

“With the significant reduction in staff, the Oil and Gas Program now struggles to meet its gas storage field inspection goals, consistently achieve permit review time frames, adequately fund training opportunities for staff and provide training for the industry.

“Important Program development initiatives, such as policies, best practices and technical guidance documents, have been put on hold indefinitely due to the lack of sufficient staff to develop and update these important pieces of the Program necessary to administer the 2012 Oil and Gas Act.

“In short, the Program has been challenged to provide an adequate level of high quality service to the public and to the industry.”

The only comments on the regulation from Commission members was from Chairman George Bedwick who said, as the IRRC members said before, a per-application fee that is expected to cover the cost of regulating an oil and gas well for the life of that well is not a good way to fund the Oil and Gas Management Program.

Chairman Bedwick also asked Scott Perry, DEP Deputy Secretary for Oil and Gas Management, if, in fact, the Fund used to support the program went into deficit this year as the background materials on the regulation said.

Perry said it did not because of the assessment of a $30.6 million penalty on ETC Northeast Pipeline for the 2018 explosion of the Revolution Pipeline in Beaver County.  Read more here.

Because neither the House nor Senate Environmental Committees voted to disapprove the fee regulation, it will now go to the Office of Attorney General for a final review and can then become effective on publication in the PA Bulletin.

Click Here to visit the IRRC webpage on the regulation showing comments received.

[Posted: June 18, 2020]  PA Environment Digest