by Othniel T. Degahson, Jr.
The Commonwealth of Pennsylvania’s Department of Environmental Protection is proposing an increase in the price of a shale gas well permit from $5,000 per well to $12,500 per well. The Department of Environmental protection justifies this as a necessity to keep the state’s oil and gas oversight program from operating at a deficit, as permit fee revenue has seen a large decrease since 2014-2015. As the DEP gets a large amount of its funding from permit revenue, they have had to decrease the amount of employees in their oil and gas program.
Permit fees for shale gas wells are paid once at a well’s birth and inspection responsibilities continue until the well is plugged decades later.
The state government under Governor Tom Wolf has known that the DEP needed more money, yet they delayed on permit fee increases due to state budget negotiations that had the possibility of a severance tax on shale, which would have a portion of those funds allocated to the DEP’s oil and gas program.
Industry representatives are generally supportive of a fee increase “to provide DEP’s oil and gas program with the resources it needs” but were blind sighted by the size of the fee increase, especially given what they viewed as excessive amounts of time for the permits to become approved. Marcellus Shale Coalition data shows the average permit wait time increase from 57 days in 2016 to 111 days in 2017.
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I think on the surface this seems like it could strictly be an issue of government funding and how the government needs to improve their permit processes. However, I think this could also have a substantial effect on the environment. As David Spigelmyer, the industry representative, stated, this proposed fee could be prohibitive for some operators. They may not be able to justify paying the large fee for what little benefit they would get from drilling a specific well. Without these industries drilling in these areas, the negative environmental effects of drilling would no longer be an issue. Of course, there would be more issues surrounding the cost of natural gas in the absence of industries willing to pay these fees and subsequently drill these wells. However, this could also bring the discussion of renewable energy sources to the forefront of policy discussions. Ultimately, I think it would be most interesting to see what would happen if industry leaders decided to not drill these wells. Would the government drop the fees back to their previous amounts or would they begin to discuss other energy resources?
There is good to this, but not completely. Overall, I don’t think it’s a great idea. Sure, it would help the DEP’s budget which would both allow them to hire back the employees they lost, and in turn help with overall environmental regulation (as long as the government doesn’t overstep its bounds….a̶n̶d̶ ̶t̶h̶a̶t̶ ̶w̶o̶u̶l̶d̶ ̶n̶e̶v̶e̶r̶ ̶h̶a̶p̶p̶e̶n̶). The problem I have, is that this isn’t a valid long term solution. This doesn’t provide any real incentive to move to alternative/clean energy, and it could just create an exodus of business from PA to states where wells are cheaper. That would hurt small businesses that can’t afford to compete with larger companies, and that would just hurt more workers. Yes, the oversight program is facing a deficit and this is the quickest way to fix it. But it’s not a way to actually help the environment. I know its a lot to ask. but maybe for the future the State should look in to… I don’t know…not going in to debt in the first place.
It seems that there is not necessarily a problem with the increase of the fee, but with the administrative process itself. The length of time required to approve a permit for “fracking” could be cut down significantly if the department utilized the appropriate resources. By not doing this, the department is ultimately losing even more money regardless of the hike in prices for a permit. It has been proven that fracking also has extremely negative effects on the local environment, which are in some cases irreversible. Due to these effects, I believe that the price for the permit should actually be higher with an additional yearly fee, however, the wait time for the permit should be shorter. This would also create an incentive for the industry to look at greener (cheaper) alternatives in order to reduce costs. There should also be an increase in short-term tax-breaks for those who choose green alternatives since the ultimate goal is to protect the environment.
One of the main problems is that increasing the cost of not-green energy sources will cut current jobs from the coal industry, etc.. However, this is necessary to encourage a switch to green alternatives and boost job growth in the green industries.
While the increase in permitting fees may help contribute to the DEP’s budget, I do not believe this is a practical solution. They should find other sources to reduce their deficit. Drilling for shale oil does have some negative outcomes, but there also several positives. As expected one of the bigger negatives of drilling for this oil is the impact on the environment. The process creates a lot of wastewater which can end up in nearby bodies of water. Along with that, the fumes produced have a negative impact on the air quality. One benefit is the improvement to the economy through the creation of jobs. It has already produced over half a million jobs across the country*. This increase in the permit price could have two possible outcomes. Like Remo said, the first would be the businesses start to drill elsewhere and removing the potential jobs from the Pennsylvania area. The other outcome would be to look into alternative fuel sources. Each possibility has their own pros and cons and I’m really curious with which option they are going to go with.
*Source: http://www.nytimes.com/2011/11/04/opinion/brooks-the-shale-gas-revolution.html
Being that the DEP officials have known since 2015 that they would need this additional funding to prop up the oil and gas program I feel like the announcement of the increase of a shale gas permit should have been discussed earlier. I do not feel that it is fair for industry representatives who stated they were blindsided by the news and that the proposed fee amount appears excessive and may be prohibitive for some operators. Although, this in the best interest for the oil and gas oversight programs, I think this could have been avoided and I think in the end branching off of Remo, this will actually hurt the smaller businesses who will not be able to afford to be in the running for competition anymore due to the increases. They are saying they want to re-hire employees with this new plan but that will not be the case for all industry workers.
I would fully support that taxation of the wells, but my curiosity is peeked wondering how likely it is that said legislation would pass. I do realize that taxpayers would have less of a fee because of the deportation of this resource as well as the extra revenue its transport would rake in. However, would governer Wolf be able to do this with support? This seems likely to be a bridge to be used to get the Republicans approval to pass another form of legislation such as a severance tax. This would take this fee away from the extraction companies and which I could only imagine being a benefit for most because of the increase in revenue as well as its shareholders. The natural gas industry in Pennsylvania is booming and mainly gains its revenue from its exportation. I hope that legislation will decide before this tax imposes negative effects on the industry and taxpayers.
Wolf is trying to paint himself as the environmentally friendly candidate. His inability to move congress on any item on his agenda has left him open to criticism from Democrats. Basically, all that he has going for him is his ability to veto insane bills that keep crawling out of the state legislature. He’s doing a good job of using what’s at his disposal to build a resume for reelection. I personally like using a threat, even if it’s empty, because PA republicans are not going to cooperate on anything. They view Wolfe as a placeholder they just have to wait out. He has to remind them that he is governor after all and he can find ways to hurt their constituencies if they keep trying to hurt his. Interested to see how this plays out.