DEP Encouraged to Explore Alternatives to Proposed Permit Fee Increase

A proposal to double the permitting fees for new unconventional wells is excessive and would further erode Pennsylvania’s competitiveness with other energy producing states, the Marcellus Shale Coalition said in comments submitted Friday.

The Department of Environmental Protection has proposed increasing current well permit application fees to $12,500 for all unconventional wells from $5,000, representing a 150% increase. Prior to pursuing a significant fee increase that will raise costs for the industry by $15 million annually, the MSC encourages DEP to explore alternative funding mechanisms.

Here are the key takeaways:

  • Excessive Increase: “The proposed permit fee increase from the current $5,000 per unconventional well application to $12,500 per unconventional well application – representing a 150% increase – is excessive and not proportional to the costs incurred by the oil and gas program to oversee the unconventional natural gas industry.”
  • Highest-in-the-Nation: “Under this proposed rulemaking, Pennsylvania would impose the highest well permit fee in the United States. … This fee increase, coupled with higher fees for air quality permits and the imposition of a new air quality permit for well sites (GP-5a), exacerbates the competitive imbalance within basins.”
  • Proportional Costs: “The MSC estimates that approximately 60% of the PA DEP Oil and Gas Program’s work is related to the unconventional shale gas industry, with the balance of work related to oversight of the conventional oil and gas industry and inspection of legacy wells that are the responsibility of the department. The unconventional shale gas industry is already paying in excess of 99% of the total costs to underwrite the PA DEP oil and gas program. Therefore, from a practical perspective, this means that the proposed permit fee increase for unconventional operators is tantamount to underwriting the costs associated with the conventional industry and legacy well costs incurred by the department.”
  • No Assurances of Relief from Delays: “The operators who will be required to remit a significantly higher fee under this proposal remain concerned that there are no assurances of improved permit review and issuance timeframes, as it is clear that the regression in permit review times experienced over the past several years was not attributable to a lack of financial resources.”

It’s important to have a robust, professional oil and gas program with sufficient resources to fulfill its statutory obligations and ensure the protection of our shared natural resources. In both 2009 and 2013, the MSC and its members understood and supported the need for reasonable permit fee increases.

However, this proposed fee is unreasonable, and, before moving forward with such a drastic hike, DEP should fully exhaust alternative revenue options, such as:

  • General Fund Allocation: “Allocate a reasonable amount of General Fund dollars to the oil and gas program, as the department does for every other program it administers.”
  • Proportional Relationship: “Identify the total costs of the oil and gas program to the unconventional industry, so that revenue generated from unconventional well permit fees and the Act 13 Impact Fee bear a reasonable relationship to this total cost, in accordance with the statutory authority of the Oil and Gas Act.”
  • Consider Costs to Small Business: “Submit a revised and accurate Regulatory Analysis Form that properly considers the impacts of the proposed rulemaking on small businesses, analyzes the competitive impact and establishes the correct cost of compliance.”
  • Full Credit for All Oil & Gas Revenue: “Align special fund reimbursement policy within the department so that full credit and revenue is provided to the oil and gas program with respect to permit fees related to the Ch. 102 and Ch. 105 programs.”
  • Incorporate Impact Fee: “Include, and not totally dismiss, the $6 million annual allocation from the Act 13 Impact Fee in the base revenues utilized by the department to operate the oil and gas program as has been allocated as general practice every year since the imposition of the Impact Fee.”

The MSC and its members stand ready to work closely with the department in addressing these concerns in greater detail.

**8/21/18 UPDATE**

Yesterday, the Pennsylvania Senate Environmental Resources and Energy Committee submitted comments urging the DEP to reconsider the excessive proposed permit fee increase:

While Pennsylvania already holds the top spot for having the highest permit application fees at $5,000, the proposed rulemaking, “Unconventional Well permit Application Fees,” would “hit it out of the ballpark” for future permit application fees at $12,500. It is our view that for the reasons stated the Department should reassess their current appropriations and realign them to fit their overall needs. Increasing existing fees on an industry that is already contributing significantly to Pennsylvania’s overall economy and workforce should not be supported or considered at this time.