Increased drilling activity in West Virginia's Marcellus Shale area and a dramatic decline in revenues from natural gas drilling permits have prompted the Department of Environmental Protection (DEP) to seek a larger piece of the state's budget pie, a larger staff to handle about 750 active wells and a dramatic increase of horizontal permitting fees.
"In 2007-2008 we permitted over 3,200 wells; in 2010 we permitted only 1,500 wells," DEP Secretary Randy Huffman told the state's House Finance Committee Tuesday. "What happened is the number of Marcellus wells that we were permitting went up [and] the number of conventional shallow-gas wells that we were permitting went down. The cost of the permit was the same for both, so our revenues dropped by over $1 million. We are actually an underfunded, understaffed program as it exists today. I've got a $1 million shortfall."
Legislation drafted by the DEP would increase horizontal drilling permit fees to $10,000 from the current $650 that all drillers pay.
"In our draft legislation we're actually proposing $10,000 for a horizontal well permit to pay not only for the shortfall that we have now, but to pay for the additional staff necessary to regulate the gas industry in a way that we deem appropriate," Huffman said. A legislative committee had previously recommended boosting the fee to $15,000.
DEP has also asked legislators to increase to 66 the number of oil and gas inspectors and permits handlers on its payroll from the current 32, who are tasked with covering approximately 59,000 wells -- about 750 of them active -- across the state.
The bill (SB 424) would also require drillers to give surface owners advance notice of any seismic activity on or near their property, prohibit oil and gas wells from being drilled within 100 feet of water wells, and require drillers to submit detailed water management plans and lists of chemicals to used in hydraulic fracturing (fracking) operations. The bill would also allow forced pooling (see Shale Daily, Feb. 1). The bill would allow West Virginia's Oil and Gas Conservation Commission, which currently regulates the drilling of deep wells, to decide pooling and unitization issues for shallow horizontal wells.
Another bill, drafted by a joint judiciary subcommittee, focuses on regulating fracking operations and horizontal drilling (see Shale Daily, Jan. 24). A provision on pooling was pulled from that bill during subcommittee meetings.
A bill introduced Jan. 31 would increase the severance tax on Marcellus gas "sold or transported out of the state" to 10% from the current 5%.