Monday, April 25, 2022

DEP Not Seeing Uptick In Oil & Gas Drilling; Expects $8 Million Deficit In Funding Oil & Gas Regulatory Program

On April 25, Kurt Klapkowski, Acting DEP Deputy Secretary for Oil and Gas Management, told the
DEP Oil and Gas Technical Advisory Board it is unlikely that enough new oil and gas well permits will come in to DEP to fill an expected $8 million deficit in funding the agency’s Oil and Gas Regulatory Program.

Klapkowski said DEP received 80 conventional and 229 unconventional permit applications through April 15 of this year which will generate about $10.2 million in revenue.

Add to that the $6 million in funding from the Act 13 drilling impact fees and total revenue amounts to about $16.2 million when $25 million is needed to fully fund the program for a year.

“Looking at commodity prices, given world events, and everything that's happening in the world today, the commodity prices are certainly up.  We haven't seen a significant uptick in permitting and drilling,” said Klapkowski.

“So, it's still not where they were in, say, 2010, where I think we were getting permits for thousands of conventional wells, and to my understanding that they're having significant supply chain issues,” said Klapkowski.  “So, folks that maybe would like to drill wells can't because they can't get the necessary supplies and equipment to do so. But, you know, that may be something that increases over time.”

“Interestingly, for the unconventional wells, the wells drilled numbers [are] down about 34 from two years ago and about 23 from a year ago,” said Klapkowski.  “We've heard different, different reasons for that. I think my sense of it, and this isn't something that we've done a lot of research on, although it would probably be interesting to do, is that the well bore lengths are getting longer, the horizontal well bores and so maybe you don't need to drill two wells to pull from the same acreage that you might've five years ago.

“So, the industry gets better at drilling longer laterals and fracking longer laterals and, and maybe the need for the permits are decreasing in terms of permit applications coming in and wells actually drilled at the end of the day.”

“There are some expenditures that we had been putting off for some time that are going to be relatively significant in the upcoming year and those primarily relate to vehicles for DEP staff,” said Klapkowski.  “We sort of squeezed those vehicles as hard as we could and now it's just time to get new vehicles.” 

Klapkowski told the Environmental Quality Board  in February-- “The bottom line is that the current fees are inadequate to support the Oil and Gas Program.  The department is proposing a future rulemaking to develop alternate funding options to adequately fund and sustainably fund the Oil and Gas Program.” 

Additional Background

In February, DEP reported to the Environmental Quality Board conventional oil and gas drilling companies only paid $46,100 of the $10,600,000 it cost for DEP to regulate that industry in FY 2020-21.  Read more here.

DEP estimates 60 percent of these costs are accounted for by activities related to unconventional oil and gas well activities-- about $15,988,224 and 40 percent by conventional oil and gas wells-- about $10,658,816.  Read more here.

Currently, DEP has a staff complement in this program of about 190 when a fully staffed program would need 226 people.  Read more here.

Visit DEP’s Office Of Oil & Gas Management webpage to learn more about this program.

For more information and available handouts, visit DEP’s Oil & Gas Technical Advisory Board webpage.  Questions should be directed to Todd Wallace, 717-783-6395.

Related Articles:

-- Financial Assurance, Plugging Regulations To Be Reviewed To Prevent New Abandoned Oil & Gas Wells Under Federal Bipartisan Infrastructure Law Plugging Program

-- DEP: Federal Bipartisan Infrastructure Law Prompting Review Of On-Site Disposal Options For Oil & Gas Well Plugging Wastes; Radioactive Waste Disposal

-- DEP: Draft Updates Coming To Regs. On Conventional Oil & Gas Waste Disposal As Early As July; Waste Reporting Changes Invited

[Posted: April 25, 2022]  PA Environment Digest

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