Independent Fiscal Office Reports Slight Increase In 3rd Quarter PA Natural Gas Production; Lowest Number Of New Shale Gas Wells Drilled Since 2008; Big Hole In DEP’s Budget

On December 3, the Independent Fiscal Office reported third quarter natural gas production increased slightly from the second quarter to 1,838 billion cubic feet, but remains 1.7% below production in the third quarter of 2023-- 1,871 billion cubic feet.

There were 63 new shale gas wells drilling in the third quarter which matches the second quarter as the lowest number of new wells drilled since 2008, according to the IFO.

Natural gas prices increased 9.8% from 2023, but "Regional and national prices have been constrained in recent quarters due to unusually high storage levels."

"Based on futures contracts for December, the IFO projects that the average Henry Hub spot price for 2024 will barely exceed $2.25, the cut off for the lowest [Act 13] Impact Fee schedule. 

"The higher fee schedule implies an increase of $30 million in Impact Fee revenues."

In June, the IFO projected another drop in Act 13 impact revenue of $114 million to from $165 to $170 million for calendar year 2024.  Read more here.

In 2023, impact fee revenue was $179.1 million, down over $100 million from the record revenue in 2022 of $278.9 million.

In September, the Pittsburgh-based Allegheny Institute for Public Policy published a policy brief on the steep decline in revenues from the Act 13 impact saying counties and municipalities should “begin lowering their expectations: on the amount of support they receive from the shale gas industry.  Read more here.

Click Here for a copy of the full IFO report.

Big Hole In DEP’s Budget

DEP depends on permit application fees to fund its Oil and Gas Regulatory Program.

As of November 22, DEP received 469 shale gas permit applications in the first 47 weeks of 2024.  

If applications come in at the same rate, DEP may get another 50 permits totalling 519 applications.

In 2023, DEP received just over 663 shale gas permit applications.

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.

So in calendar year 2024, DEP will again have a 75% shortfall in the revenue needed to support its Oil and Gas Regulation Program.

To make up for this loss of revenue, the FY 2024-25 state budget included $11 million in taxpayer money to support the Oil and Gas Program.

The conventional oil and gas industry permit application fees rarely generate more than $46,000 a year to support a program that costs taxpayers $10.6 million to ensure compliance with state environmental laws and regulations.

 Again, we find the oil and gas industry not paying its way because of the Act 13 impact fee and permit application fee structure Pennsylvania put in place.

Upcoming Meeting:

-- DEP Oil & Gas Advisory Board Meets Dec. 5 On Methane Emissions Reduction; Federal Plugging Program; Injection Well Primacy; Financial Assurance; Drilling & Permitting Activity Impacts On DEP Budget  [PaEN]

Related Articles This Week:

-- DEP Issues Abandoned Well Violation To Oil & Gas Wastewater Injection Well With Nearly Full Storage Tanks, Expired EPA Permit In Venango County  [PaEN]  

-- PUC Enforcement Bureau Files Complaint Against Philadelphia Gas Works Over 2021 Natural Gas House Explosion; Alleging The Company Failed To Properly Investigate, Address Leaking Gas Pipeline  [PaEN] 

NewsClips:

-- Reuters: Natural Gas Prices Rose 30-50% In 2024; Key Global Natural Gas Prices Set To Keep Rising Into 2025 

-- Reuters: US LNG Gas Exports To Europe Surge In November On Higher Prices

-- Bloomberg: European Natural Gas Rises As Colder Weather Forecasts Add To Worries

-- Reuters: Shell, QatarEnergy Sign Long-Term Purchase Agreement To Sell LNG Gas To China

[Posted: December 3, 2024]  PA Environment Digest