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Pennsylvania DEP Lacks Funding, Staff; Oil/Gas Permit Fees Could Be Raised

The Pennsylvania Department of Environmental Protection (DEP) remains severely underfunded and understaffed, a situation that could require legislative remedies and another increase in oil and gas permitting fees, the agency's secretary said Tuesday during a state budget hearing.

Over the last decade, as the average state agency lost about 6% of its workforce, the DEP lost 14%. The agency, which regulates the state's oil and natural gas industry, has lost about 671 positions, 411 of which were inspectors and permit writers. Its headquarters in Harrisburg doesn't have wireless internet.

"The governor is doing everything he can, within the context of a $2 billion structural budget deficit to at least keep DEP whole and create a platform from which we can grow and improve and restore the services that we've lost over the last decade," said Secretary John Quigley during his budget testimony before the House Appropriations Committee.

Gov. Tom Wolf and lawmakers are facing the task of balancing two budgets at once (see Shale Daily, Feb. 9). The state has been without a budget since July 2015 after Wolf vetoed a Republican-crafted version. A compromise has been out of reach since.

The DEP receives about 22% of its funding from the state general fund, 28% from federal funds and another 50% from fees and fines. In 2008, the state budgeted $220 million for the agency. That was cut to $143 million in FY 2014-2015, the last time the state passed a budget.

In his FY 2015-2016 budget, Wolf proposed a 6% general fund increase for the agency. This year, he proposed another 4.88% increase on top of that. While Quigley said the proposals would be enough, he added that the additional funding would not help the agency hire the personnel it needs to restore the job cuts over the last decade.

While the entire agency employs about 2,700 people, its Office of Oil and Gas Management consists of 227 people. The office is funded entirely by oil and gas permit fees, which were increased in 2014 (see Shale Daily, June 13, 2014). The increases were expected to generate an additional $4.7 million for the agency, but now it faces a revenue shortfall given the decline in drilling activity in the state.

"No, it is not generating the money that was anticipated," Quigley said when asked by Republican Rep. Jeff Pyle if those fees would be enough going forward. "The amount of shale gas permits that were issued last year was reduced by about 33%," compared to 2014, he said.

"We are looking at a situation where that revenue stream is going to crash head on into our staffing needs and there may have to be an adjustment in that fee structure going forward."

Pyle then asked why the agency needs more inspectors and personnel if drilling in the state has declined. Quigley said each well in the state -- there were 6,618 producing shale wells alone at the end of last year -- needs to be inspected five to six times over the course of its productive life.

"We're probably at half that rate at this juncture," he added. "What we're doing with this lull, is it's allowing us to get around to some of these wells more frequently than we have in the past."

He also said the agency has an inventory of 12,000 abandoned oil and gas wells. Some of those would likely need to be inspected and plugged. The agency believes, however, that the number could be closer to 200,000 abandoned wells.

Quigley said DEP has significantly fallen behind on all of its permit approvals throughout the agency. He has repeatedly said since taking over the agency in January 2015 that DEP would need more staff and better technology to effectively do its job. Republican Rep. John Maher, who also serves as chairman of the House Environmental Resources and Energy Committee, said the "time has come to stop complaining about your headcount and start owning it," adding that the permitting issues should be handled with better management.

"You can't get blood out of a stone," Quigley said in response. "Permit reviewing is a technical, legal, engineering analysis. It's not a rubber stamp. It requires work. It requires bodies, and we do not have sufficient staff."

Quigley said the agency would be rolling out electronic permitting this year to help streamline the process. Ultimately, he said he wants to get DEP off paper and into the 21st Century. He said he eventually hopes to have things like bonding, bidding and payments all done electronically. While Wolf's budget would not provide funding for additional personnel, it would invest up to $2 million for technology upgrades.

"Before we ask for additional staff, it is prudent and it makes sense to make the investments in [information technology] to minimize the amount of additional bodies that I have to come to this body and ask for," Quigley told lawmakers.

The state budget hearings are scheduled to continue until March 10. By law, the state must pass a budget by July 1.

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