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Unconventional Permit Fees Increased in Pennsylvania

An increase in the fees charged for unconventional oil and gas well permits in Pennsylvania went into effect on Friday under a new flat-fee schedule that will not apply to traditional vertical wells.

The move comes as part of a broader regulatory update to Chapter 78 of the state code, which sets out environmental protection and permit application standards. It has been under review since the state legislature passed the comprehensive oil and gas law, Act 13, in 2012 (see Shale Daily, Jan. 14; Feb. 15, 2012).

The Pennsylvania Environmental Quality Board first approved the fee increase in January at the request of the Pennsylvania Department of Environmental Protection (DEP), which has faced increasing expenditures and dwindling revenues as unconventional development in the Marcellus Shale increases.

The new flat-fee schedule replaces one that was approved in 2009 to set permit rates with a sliding scale based on the depth of a wellbore (see Shale Daily, Feb. 23, 2009), which on average generated $3,200 for nonvertical unconventional wells and $2,900 for vertical unconventional well permits.

Operators will now be charged $5,000 for unconventional nonvertical well permits and $4,200 for unconventional vertical well permits. The state estimates that the increase will generate an additional $4.7 million in revenue.

The rule change also redefines the difference between conventional and unconventional wells. Under the old rules, a conventional well was defined by technology that did not match that of a horizontally fractured (fracked) well. Under the change, a conventional well is defined as one drilled specifically to produce oil, drilled to target non-shale formations, drilled above the Marcellus Shale or below it without requiring hydraulic fracturing.

The DEP plans to use the increased fee revenue to hire more personnel and make up for a decline in overall permitting activity since 2010. The DEP's Office of Oil and Gas Management has grown significantly since 2004 when just 64 full-time employees worked there. Today there are 202 full-time employees, and the DEP said it will soon need more, according to the rulemaking notice.

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