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Pennsylvania DEP Advances Proposal to Hike Unconventional Oil/Gas Permit Fees

The Pennsylvania Department of Environmental Protection (DEP) has formally proposed more than doubling unconventional oil and gas well permit fees to cover the increasing costs of regulating the industry.

The Environmental Quality Board (EQB), which considers DEP’s regulations, adopted the proposed rulemaking to increase fees earlier this month. The proposal must now be approved for publication in the state bulletin, DEP spokesman Neil Shader said.  Once it’s published, a 30-day public comment period would begin.

Gov. Tom Wolf and the agency jointly announced earlier this year that a regulatory package would be released to increase the fees. About half of the DEP’s budget comes from the state general fund and federal funds, while the other half comes from fees and fines. DEP’s general fund allocations have steadily decreased over the years. Wolf said the additional funds would help to pay for DEP’s Office of Oil and Gas Management and in turn reduce the agency’s backlog of unconventional permits and the outdated process to obtain them.  

The agency also has consulted with the Oil and Gas Technical Advisory Board about the increase. The rulemaking would increase current fees from $5,000 for horizontal unconventional wells and $4,200 for vertical unconventional wells to $12,500 for all permit applications. The proposal does not apply to conventional wells.

In documents submitted to the EQB, the agency said permit application fees have been flat at $13.9 million in fiscal year (FY) 2015-2016 and $15.7 million in FY2016-2017. But costs to run the oil and gas office exceeded $20 million in both years. To cover the difference, DEP said it has used reserve funds from the state’s Well Plugging Fund, which could be insolvent by FY2019-2020 without a permit fee hike.  

The agency also noted that the oil and gas office’s staffing levels have declined from 226 to 190 employees over the last decade. Operating expenses only account for 10% of the program’s costs and any further savings would have to be achieved with even more staff cuts. That would further threaten the adequacy of the agency’s regulatory oversight, DEP said.

The agency said it doesn’t expect the fee increase to be finalized until next year or in 2020. The fees were last increased about four years ago from an average of $3,600 based on the depth and length of a well to a flat fee of $5,000.

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