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Natural Gas Industry Tells House They Want Faster Permit Reviews, But Didn’t Say They Don’t Use 40% Of The Well Permits They Get From DEP; Industry Practices Keep Energy Prices High

At a February 6 hearing of the House Republican Policy Committee, members and the natural gas industry recommended the need to remove roadblocks to faster permit reviews by DEP they said stand in the way of economic growth and lower natural gas prices.

David Callahan, president of the Marcellus Shale Coalition, said “We need pipelines to facilitate more production, and the lack of pipelines is holding back production. We need to provide that precise operating environment, a predictable operating environment … but we need to look at all the things the industry goes through … and see where those hurdles and impediments are.”

He pointed to the state’s “cumbersome” natural gas permitting process, which makes it harder for companies to strike new wells.

“One of the most critical challenges to this expansion is the inability to acquire operating permits in a predictable timeframe,” Callahan said. “Pennsylvania’s process to review and approve required permits is entirely unpredictable and unnecessarily time-consuming.” Read more here.

This Republican hearing and natural gas industry comments are part of an initiative launched at a Senate Republican Policy Committee hearing January 20 to promote things like the automatic approval of permits and putting limits on public comment opportunities on permits under the guise of trying to lower energy prices. Read more here.

In fact, as reported by national business media, natural gas industry practices and policies are trying to keep natural gas prices as high as they can, which is only to be expected of any business. They don’t want to sell their products on the cheap.

The industry can’t maximize profits that way and it has been a record year of profits for the oil and natural gas industry-- over $200 billion alone in 2022. Read more here from the Financial Times.

Reuters just reported on February 8, while U.S. natural gas production hit a record high so far in 2023, overall demand is expected to fall for the first time for the second year in a row, according to the U.S. Energy Information Administration. Read more here.

The U.S. Energy Information Administration also reported 6.2 GW of natural gas-fired electric generation plants will be retired in 2023 because they are the older, less efficient plants, further reducing demand for gas. Read more here.

As a result of reduced demand, the industry is desperately seeking new markets, the real reason they are pushing for these “reforms.”

Public policy makers need to look at the “Big Picture” - the “Whole Picture”-- not just what industry wants.

In particular, the General Assembly needs to look at the obvious inadequacies in Pennsylvania state laws and regulations that fail to protect public health and the environmental from the impacts of the natural gas industrial infrastructure in the state. Read more here.

Click Here for 60 Years Of Fracking In Pennsylvania.

40% Of Permit Go Unused

The natural gas industry did not mention that 40 percent of the well permits issued by DEP to unconventional natural gas drillers go unused.

As of January 27, DEP’s Oil & Gas Workload Report shows DEP has approved permits for 23,178 unconventional shale gas wells of which only 13,935 wells were drilled.

The gap of 9,243 wells-- just short of 40%-- haven’t been drilled. And that number keeps growing.

They were never drilled for several reasons, but probably waiting for the higher natural gas prices possible is the biggest one, corroborated by natural gas industry executives (see below).

There could also be operational considerations, financial limitations on implementing a drilling plan by Wall Street taking profits and not investing in more production [Read more here], labor shortages and supply chain issues [Read more here], the timing just didn’t work out or they just let permits expire.

You would be hard-pressed to find any other program in DEP with this kind of a record for unused permits.

Hopefully, the unconventional industry is improving its ability to submit well permit applications they will actually use, rather than wasting DEP staff time.

Permit Delays?

The oil and gas industry again quoted “the fact” that it can take “200, 300 or even more days” to get a simple permit from DEP.

DEP’s just released 2021 Oil and Gas Program Annual Report says--

-- Oil & Gas Drilling Permits take 20 days in the DEP Southwest Office and 22 days in the Northwest Office;

-- Related Erosion & Sedimentation Control Permits take 58 days in the Southwest Office and 40 days in the Eastern DEP Office.

These are numbers for permits covered by DEP Permit Decision Guarantee Program relaunched by Gov. Tom Corbett.

DEP's last weekly report on permit reviews showed it took action on 690 permits from all programs and 93 percent of those actions were within the Permit Decision Guarantee deadlines.

50%+ Of Applications Incomplete/Deficient

The Cumberland County Conservation District told the House Environmental Resources and Energy Committee at a hearing in 2019 that more than half of the erosion and sedimentation permit applications they receive from consultants (almost all registered engineers) are incomplete and/or deficient. Read more here.

DEP’s own analysis of applications it receives found in 2017 60 percent of erosion and sedimentation permit applications were incomplete or had technical deficiencies in the Oil and Gas Program and outside of that program as many as 80 percent of the permit applications DEP received were incomplete or had deficiencies.

33 Business Days To Respond

The Cumberland County Conservation District also told the House Environmental Resources and Energy Committee at a hearing in 2019 it took consultants an AVERAGE of 33 business days for consultants to respond to deficiencies in permit applications-- more than 6 calendar weeks. Read more here.

Again, these are not isolated experience, and we hope the numbers have improved, but it points to a real problem in permit decision delays many times isn’t under the control of DEP or conservation districts.

Pipeline Permit Delays?

The Marcellus Shale Coalition again pointed to the need for pipeline infrastructure, but they didn’t tell the Committee members the pipeline infrastructure the industry really wants is to take more natural gas out of Pennsylvania to send to other states and countries where they hope to get the highest price possible for their product.

And those high prices will be passed along to Pennsylvania energy consumers like they have been since the beginning of the Russian invasion of the Ukraine which caused the latest spikes in natural gas prices in the state, not the lack of infrastructure in Pennsylvania.

At a March 1, 2022 House hearing on DEP’s budget, then Secretary Patrick McDonnell addressed a question about permit delays for pipeline permits by saying simply, “Not on our end.” Read more here.

In fact, DEP has been criticized by members of the Senate and House, local officials, environmental groups and citizens for not withholding permits from pipeline companies that have been fined over $70 million for violations of environmental laws and continue to violate. Read more here.

The major natural gas pipeline projects that have been canceled have been in New York-- Constitution Pipeline-- and New Jersey-- PennEast Pipeline, not Pennsylvania.

Recognizing that fact, Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Committee, announced in April 2019 he would push and continues to push legislation that would ban the sale or transport of Pennsylvania natural gas to states that impeded the development of natural gas pipelines. Read more here.

We should be good neighbors, but doing major surgery to DEP’s permit review process and cutting opportunities for public review of permits in Pennsylvania will not affect opposition to pipelines in New York and New Jersey.

Race To Avoid Federal Regulations

EnergyWire reported February 6 energy companies are racing to build new energy infrastructure-- LNG natural gas export terminals, pipelines, hydrogen and other projects-- before federal regulations can be updated or put in place. Read more here.

Industry Waits For Highest Price

With respect to high natural gas prices, infrastructure in Pennsylvania has little to do with price spikes, something the Russian war in Ukraine has taught us and national business media has covered extensively.

It is natural gas industry business practices and constraints that are the major contributors to high prices, not DEP permit reviews. In fact, here’s what major industry leaders have to say about natural gas prices and controlling production to keep prices high in the national business media.

Chesapeake Energy CEO Nick Dell’Osso in late January urged his peers in the U.S. natural gas industry to scale back production to increase the price of natural gas. Read more here.

Pittsburgh-based EQT Corporation CEO Toby Rice, who has been an outspoken advocate of dramatically increasing LNG exports to take advantage of higher natural gas prices in foreign markets, said decreases in the price of natural gas will only slow supply growth. Read more here.

Clearly, the industry knows high prices are in the best financial interest of the natural gas companies and their investors and they’ve said so clearly over the last year in their reports of record profits and returns to their stockholders.

There was no mention at the hearing of the fact natural gas prices increased over 94.7% in 2022 because of Russia’s war against Ukraine and that natural gas prices are now set on world markets, not by how much natural gas infrastructure there is in Pennsylvania or how much gas we produce. Read more here.

The war clearly shows linking the U.S. and Pennsylvania to high-priced, volatile LNG natural gas markets in Europe and Asia resulted in increasing natural gas costs to Pennsylvanians by up to 128%, and drove electricity prices up by as much as 34%. Read more here. Read more here.

And this price volatility will continue into the foreseeable future, according to Pittsburgh-based EQT Corporation, the largest natural gas producer in the U.S. Read more here.

Click Here for a Committee summary of the hearing.

NewsClips:

-- EnergyWire: Energy Companies Are Racing To Build New Energy Infrastructure-- LNG Terminals, Pipelines-- Before Federal Regulations Are Updated

-- Reuters: U.S. Natural Gas Output Hit Record High In 2023, Demand To Fall, First Time Demand Would Fall For 2 Years In A Row - US. EIA

-- Pittsburgh Business Times: Natural Gas/Coal Advocates Say Reliability Of Supply Will Help Price [Rep. Kail (R) State Govt. Needs To ‘Stay Out Of The Way,’ Natural Gas Drillers]

-- The Center Square - Anthony Hennan: ‘Red Tape’ Skyrockets Energy Costs In PA Say Natural Gas Advocates

-- Warren Times Editorial: Making Push For Quicker Permits [Natural Gas Pipelines Used As Example]

-- Post-Gazette - Anya Litvak: As More Utility Customers Struggle To Pay Their Bills, More Are Also Cut Off For Nonpayment [Cost Increases Due To Natural Gas Price Spikes]

-- TribLive: Drop In Oil Prices Brings First Weekly Decline In Gasoline Prices This Year [PA Average $3.76 - In Dayton, Ohio $2.91 Monday]

-- AP: Firm: Faulty Weld, Pressure At A Bend In Keystone Pipeline Led To Kansas Oil Spill; Cost Of Cleanup Now At $480 Million

-- WSJ: BP Slows Transition To Renewable Energy As Oil Bonanza Continues

-- Reuters: BP Makes Record Profit In 2022, Boosts Oil Spending

-- The Economist: Where On Earth Is Big Oil Spending Its $200 Billion Profit Bonanza?

PA DEP Public Notice Dashboards:

-- Pennsylvania Oil & Gas Weekly Compliance Dashboard - Feb. 4 to Feb. 10 - 12 NOVs For Abandoning Wells Without Plugging Them [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices/Opportunities To Comment - Feb. 11 [PaEN]

-- DEP Posts 57 Pages Of Permit-Related Notices In Feb. 11 PA Bulletin [PaEN]