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Expect PA Permitting Fees to Increase Across the Board; PA State Budget

  February 2018 / Vol 8 Issue 1

Expect PA Permitting Fees to Increase Across the Board; PA State Budget
By: Teresa Irvin McCurdy, President of TD Connections, Inc.

 

Per Pennsylvania’s Constitution, the Governor must present a proposed State Budget for the next Fiscal Year which begins on July 1st to the General Assembly on the first Tuesday in February for consideration and final approval by June 30th.  However, since 2003 when Governor Rendell presented his first Budget the norm has been for the Budget to be late anywhere from days to as long as 6+ months.  There are various reasons one could point to such as: 1) structural issues such as school funding, pensions, elderly and welfare entitlements; 2) too much spending requiring additional revenue/taxes; and 3) party priorities. The last one causing the most hurdles.

As this paper goes to press the Governor will be presenting his priorities to the legislature on February 6th. Although most expect he will continue his push for more funding for schools and for a severance tax, what else will he be pushing for? During a press briefing on the Governor’s regulatory reform initiatives held on January 26th, he also announced he would be seeking an additional $2.5 million for additional staffing for DEP to “continue to provide high-quality, responsive oversight.” While taking questions, he and DEP Sec. McDonnell explained that the additional $2.5 million will only add about 35 new positions which averages out to roughly $71,000 per position with most of those positions being in the water program and only a few going to other programs. Later, staff acknowledged that none of those new positions would be in oil and gas.

Instead, the Office of Oil and Gas Management (OOGM) is preparing a fee package to submit to the Environmental Quality Board (EQB) in May seeking to more than double the current flat well permitting fee of $5,000 to $12,500 with no distinction of whether the well is vertical or horizontal. With the additional funds, OOGM plans to increase the number of reviewers and expands its IT measures such as ePermitting and eInspections. There will be a public comment period.  However, DEP insists that without the fee increase it will run out of funds to run the department by the end of FY 2019. Therefore, they are seeking the fee increases to be effective before the end of FY 2019.

OOGM states that they have been operating with minimum staff, reduced expenses and have implemented measures to save costs. One example of their success they boast is their eInspections which has lead to an increase in the number of inspections per inspectors with greater transparency. Although NOVs have gone down, the department has used the fines to help fill its budget gaps.

But wait, this fee increase is only for the benefit of OOGM. There are other bureaus within DEP that have or are seeking fee increases since mid-2017 such as Air Quality, Waste, Water Quality Management and NPDES Program, Radiation Protection, Safe Drinking Water, Dam safety and Waterway Management, Noncoal Mining (Aggregates) Program, and Environmental Laboratory Accreditation application fees. Some of these increases are still in the proposed stage so we haven’t seen how much they will be yet, but many are seeking large fee increases as well.

Last year, Governor Wolf proposed that DEP receive $149.667 million which is almost $10 million more than three years ago. Where was those funds allocated?  Below is a chart showing the proposed line-item budgets for the past four years.

As you can see, the amount allocated to environmental issues has increased over the years with the priorities changing each year. You will also note that not a signal line item is allocated oil and gas or other specific bureaus. That is because in Pennsylvania most of the operating expenses of each bureau (air, waste, O&G, etc.) obtain their funding from fees, federal money and fines.

Perhaps PA should look at how it funds its programs again while it is looking at regulatory reform. For instance, the Impact Fee was passed to help local governments deal with the impact of exploration and operations on their community; however, only around half of the funds collected actually go to local governments and not all of them have drilling in their communities. The rest is distributed to other miscellaneous funds within the General Fund with DEP getting some. But it doesn’t mean it goes to help natural gas.

For instance, the state stresses the need for tighter methane regulations to control leaks both on the well sites as well as with abandoned and orphan wells. However, the state doesn’t show that it is a priority when it comes to allocating funding to the program. Last year only $92,000 was allocated for Abandoned Well Plugging, down form $251,000 two yeas ago and $400,000 to Orphan Well Plugging, down from $1,152,000 two years ago. Yet the Well Plugging Account had $21,627,000 two years ago and is projected to have $25,812,000 in it this year. If this is such a big environmental issue for the state, then why is the find being drastically cut?

Meanwhile, the Administration is projecting that the number of oil and gas drilling permits processed will increase from 1,916 in 2015-16, and 1,550 in 2016-17, to 1,750 in 2017-18 and then hold steady around 2,000 permits processed each year. I think most reading this story would agree that the future numbers are probably high due to low market conditions, the rig count continuing to be down and companies still weighing if the economics in PA work.

The Administration and General Assembly need to stop looking at each permit fee and each tax individually and look at it as a whole. The cost of doing business in Pennsylvania is high and is continuing to rise causing the large gas companies to leave. At least a dozen companies have sold their acreage to another company last year to do business in other states where the business climate is friendlier, and the government is not looking to tax and regulate the industry to death.

I’ve heard too many people whether they were elected officials, environmentalists, or staff in the Dept. of Energy say, “where are they going to go as the gas isn’t going anywhere.” I’ve reminded them that is true, and the gas will stay there while the companies leave and go to other plays where it is more economical. During the slowest part of the downturn, I saw many friends lose their jobs and many vendors/businesses go out of business. Whether you are an operator, vendor, mineral right owner or someone who reaps the benefit of low natural gas prices; remind the Administration and your elected officials that the industry as a whole is a major contributor to PA and tell them how it personally affects you. The opposition takes time from work to make their voices heard to work against the industry. We all need to do the same and make our voices heard.

If you have a problem and/or a solution, Teresa would love to hear from you by
contacting her at 717-329-6402 or Teresa@TDConnections.com.

 

 

 

 

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