On February 15, the Environmental Quality Board will hear a presentation from DEP that will show a $4.7 million-- 17.6 percent deficit-- in FY 2022-23 funding needed to support the Oil and Gas Program that regulates both conventional and unconventional wells.

The information is included in the Oil and Gas Program Fee Report required every three to determine the adequacy of funding for the program.

The report includes a workload analysis, a review of steps DEP has taken to reduce costs while still achieving its mission and a projection of future costs and revenues.

Increasing Bond Amounts

The EQB is also likely to hear a general update on DEP’s evaluation of rulemaking petitions accepted by the Environmental Quality Board in November to increase oil and gas well bonding amounts in-line with the taxpayer cost to plug them to deter future abandon wells.  Read more here.

This is a significant issue because DEP has only $15 per well in bonds on hand to deter future abandoned wells from existing oil and gas well owners.  Read more here.

And because conventional oil and gas well drillers continued to try to abandon wells without plugging them 813 times in 2019 and 2020.  Read more here.

Oil & Gas Program Fee Report

DEP Executive Deputy Ramez Ziadeh told DEP’s Citizens Advisory Council on January 18-- “One of the main priorities that we're gonna be working on is to establish a stable source of funding that will move away from well permit application fees as it has become evident over the years that this one-time source of funding fails to account for the oversight required by the department for the decades that a well may be operating.”  [Read more here.]

The latest unconventional well permit fee increase became effective on August 1, 2020 and was already out of date when it was adopted.  It was in development for over two and a half years.  The last update was in 2014.  [Read more here.]

There has been no increase in fees for conventional oil and gas drillers since 2014.

The revenue projections done for the unconventional fee regulation were based on DEP receiving 2,600 permits a year and a full staff complement of 226, according to the fee report.

In calendar 2021, DEP received 775 unconventional well permits, far less than a third the number needed to adequately support the program.  Staff complement is presently 190, according to the report.

DEP projects the cost of running the existing Oil and Gas Program will be about $26,647,040 in FY 2022-23.

The report estimates 60 percent of these costs are accounted for by activities related to unconventional oil and gas well activities-- about $15,988,224 and 40 percent by conventional oil and gas wells-- about $10,658,816.

The report notes fees on conventional oil and gas well permits brought in only $46,100 in FY 2020-21 which means conventional oil and gas drillers only pay for 0.4 percent of the cost of regulating their industry; the unconventional industry pays the remainder.

For reference, in 2021, DEP inspections found 4,386 violations of environmental regulations at conventional oil and gas operations and 1,096 violations at unconventional (shale gas) wells.  [Read more here.]

As of December 32, 2021 there were 100,500 active conventional wells in Pennsylvania and 12,694 unconventional wells.  [Read more here.]

Other Income

In January 2020, DEP did collect a penalty assessment of $30.6 million from ETC Northeast Pipeline for the 2018 explosion of the Revolution Pipeline in Beaver County that was deposited into the Fund supporting the Oil and Gas Management Program.  [Read more here.]

And the penalty funding did prop up the program for a while, however, DEP has never used penalties as a way of raising money to support its regulatory programs and it would be bad public policy to do so.

There have been suggestions by the Marcellus Shale Coalition to use general taxpayer money to support the regulatory program instead of having the industry pay for the program, but as is well known, the track record of the General Assembly and recent governors providing General Fund support to environmental programs isn’t exactly steller.

In 2010, Gov. Rendell actually bragged about the fact General Fund monies for DEP were below 1994-95 appropriations. [Read more here.]

Since 2003, General Fund support for environmental programs in DEP have been cut about 40 percent and as a result staffing was reduced by nearly 30 percent, especially in water quality protection programs.  [Read more here.]

Conclusion

The fee report concludes, “...due to the continued downturn to the volume of unconventional well permit application received to date, the current permit fee and structure is not adequate to sustain the oil and gas program into the future.

“Comments received in 2019 in the proposed “Unconventional Well Permit Application Fee” rulemaking process suggested that DEP should consider identifying another source of funds to pay for the administration of Oil and Gas Program, since the permit fee cannot be relied upon based on the uncertainty of future revenue levels.

“Likewise, during the Independent Regulatory Review Commission (IRRC) meeting on June 18, 2020 when the IRRC approved the final Unconventional Well Permit Application Fee rulemaking, the Chairperson commented that a fee structure based on a one-time permit fee to cover the ongoing costs to administer the DEP oil and gas program is unpredictable and not sustainable.

“DEP agrees and is in the process of developing alternate funding options.”

Click Here for a copy of the Oil & Gas Fee Report.

Also on the EQB agenda is a fee report for Radiation Protection Programs.  The report recommends a number of fee increases for major parts of the program.

The meeting will be held in Room 105 Rachel Carson Building starting at 9:00 a.m.  See webpage for remote options to join the meeting.

For available handouts and more information, visit the Environmental Quality Board webpage. Questions should be directed to  Laura Griffin, Regulatory Coordinator,  laurgriffi@pa.gov, 717-772-3277.

Related Articles:

-- DEP Outlines 2022 Priorities: Make Up Deficit In Oil & Gas Funding; Get Resources Needed To Invest New Federal Mine Reclamation, Oil & Gas Well Plugging Funds

-- DEP: Conventional Oil & Gas Drillers Tried 813 Times To Abandon Wells Without Plugging Them; Failed To Report Waste Generated 836 Times Over 2 Years

-- Guest Essay: Commonwealth Budget Should Fully Fund Environmental Protection - By Rep. Greg Vitali, Minority Chair House Environmental Committee

[Posted: February 3, 2022]

2/7/2022