PA Environment Digest Blog: DEP Reports Only 1 Shale Gas Well Permit Under Review Drastically Reducing The Revenue Needed To Run Its Entire Oil & Gas Regulatory Program

Friday, April 5, 2024

DEP Reports Only 1 Shale Gas Well Permit Under Review Drastically Reducing The Revenue Needed To Run Its Entire Oil & Gas Regulatory Program

The Department of Environmental Protection reported in its Oil and Gas Workload Report for the week ending March 29 that it has only 1 shale gas well permit under review, which has huge implications for the revenue coming in to run its entire Oil and Gas Regulatory Program..

So far this year DEP received 95 shale gas well permits.

If this pace keeps up, and given the price of gas currently it very well might as gas companies pull in production in hopes of raising gas prices [Read more here], it means DEP will receive only 380 permits, less than 20% of the revenue it needs to run the program.

In August of 2020 when the last permit fee increase was put in place, DEP estimated it would need the revenue from 2,000 unconventional shale gas permits a year to adequately support the regulatory program for both conventional and unconventional oil and gas drilling. Read more here.

DEP has said well permit fees have not generated the revenue needed to support the Oil and Gas Program for at least the last 9 years-- since 2014. Read more here.

Federal Plugging Programs At Risk

This drastic reduction in revenue also comes at a time when DEP’s Oil and Gas Program is trying to implement a huge new federal abandoned conventional well plugging program and a new conventional active well plugging program.

DEP has applied for the next $76 million in abandoned well plugging funding and is expected to receive $44 million for the conventional well plugging program to reduce methane emissions, much of which is expected to be given out in grants. Read more here.

DEP can use some of the funding to support staff to administer these programs, but it was meant to operate hand-in-glove with the regulatory program.

Visit DEP’s Oil and Gas Program Bipartisan Infrastructure Law webpage for more information.

More Background

The Chair of the Independent Regulatory Review Commission said in 2020 permit application fees is a very poor way to pay for this program that regulates wells over their entire productive life (20 to 40 years, and forever after they are plugged). Read more here.

Other DEP regulatory programs have adopted an annual “permit administration fee” in addition to permit application fees to make up for significant General Fund appropriation cuts and to reflect the reality of when a DEP permit is issued it’s not a once and done exercise.

The facilities have to be inspected, reports reviewed from permittees and otherwise monitored and enforced.

In 2023, 423 new unconventional shale gas wells were drilled and 177 conventional oil and gas wells adding to DEP’s permanent workload.

So far in 2024,100 new unconventional shale gas wells were drilled and 25 conventional wells.

Gov. Shapiro’s proposed budget includes $11 million to support the program to make up for these losses, but more may be needed if permit applications are down this much.

Kurt Klapkowski, DEP Deputy Secretary for Oil and Gas Management, told the Oil and Gas Technical Advisory Board on March 19 DEP was working on a draft regulation to change the permit fees for shale gas well permits to generate the revenue needed to better support the regulatory program and hopes to present it sometime this year.

DEP’s Non-Regulatory Agenda has no schedule for consideration.

Since October, Kurt Klapkowski and his staff have been discussing applying an innovative concept-- borrowed from the Storage Tank Program-- of having third party certified inspectors inspect oil and gas wells. Read more here.

This would create a whole new private industry, paid for by well owners, that would not only ensure more frequent inspection of wells and better compliance, but relieve the pressure to hire more state inspectors at taxpayers’ expense.

Of course, the initial reaction of conventional well owners was they don’t want to pay for that. They called it an “unnecessary cost.” Read more here.

That fits the pattern. They don’t want to pay for disposing of their waste-- they would rather spread it for free on public roads and let taxpayers cleanup the mess-- or filing well integrity reports or report how much waste they generate and oil and gas they produce or much else that involves the real responsibilities of oil and gas well ownership.

In February 2022, DEP reported to the Environmental Quality Board an estimated 60 percent of the costs of the Oil and Gas Program are accounted for by activities related to unconventional shale gas wells-- about $15,988,224 and 40 percent by conventional oil and gas wells-- about $10,658,816. Read more here.

DEP also reported to the Board conventional oil and gas drilling companies only paid $46,100 of the $10,658,816 it cost for DEP to regulate that industry in FY 2020-21. In other words, next to nothing. Read more here.

On the conventional oil and gas well side, DEP has 20 permits under review, received 53 this year, processed 45 and issued 44, according to the March 29 Workload Report.

Again, the conventional industry’s contribution to paying for the program that also regulates them is negligible.

(Photo: For those not familiar, this is an Inbox - Outbox that used to sit on desks to organize paperwork coming in and going out. Cleverly, that's how email inboxes got their name.)

PA Oil & Gas Industry Public Notice Dashboards:

-- PA Oil & Gas Weekly Compliance Dashboard - March 30 to April 5 - 19 Abandoned Well Violations; Venting Gas; Spills; No Containment; Erosion BMP Failures [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices/Opportunities To Comment - April 6 [PaEN]

-- DEP Posted 75 Pages Of Permit-Related Notices In April 6 PA Bulletin [PaEN]