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Baker Hughes: PA Natural Gas Drilling Rig Count Down To 12, Lowest In More Than 17 Years; Community Support Drops; Big Hole In DEP Budget

On October 25, Baker Hughes reported the number of natural gas drilling rigs in Pennsylvania dropped to 12, the lowest number of rigs in the state since July 2007, according to Reuters.

Since August 23, the drill rigs in the state dropped from 21 to 12-- a 42% drop, according to Baker Hughes.

Natural gas companies are reducing the number of rigs and new wells they are bringing online in an attempt to raise the prices of natural gas.

Reuters also reported they are experiencing higher labor and equipment costs and more focused on paying down debt and boosting shareholder returns instead of raising output.

Again, as a result of these industry changes, we find the oil and gas industry is again not paying its way because of the Act 13 impact fee and permit application fee structure Pennsylvania put in place.

Expect Much Less Community Support

In June, the Independent Fiscal Office issued a report on the latest projections of revenue from the Act 13 Shale Gas Drilling Impact Fee showing a drop in calendar 2023 revenue to $179.1 million-- a nearly $100 million decrease from $178.9 in 2022. Read more here.

The IFO projects another $100 million drop in revenue in calendar year 2024 fee revenue from 2022 to $170 million.

This drop in revenues is the result of lower natural gas prices set by international markets and the fact the gas industry is drilling fewer new wells in an attempt to get the price of natural gas to increase.

The drilling impact fee is a per well fee and not a fee on production like all other oil and gas states have.

On September 19, the Pittsburgh-based Allegheny Institute for Public Policy published a policy brief on the steep decline in revenues from the drilling impact fees saying counties and municipalities need to “begin lowering their expectations” on the support from the shale gas industry drilling impact fee. Read more here.

The bottom line-- expect much less community support even though the vast infrastructure of industrial sites, pipelines, processing facilities and drill pads is still there and growing.

Permit Fee Revenue Drops Again Puts Hole In DEP’s Budget

DEP depends on permit application fees to fund its Oil and Gas Regulatory Program.

As of October 18, DEP received 408 shale gas permit applications in the first 42 weeks of 2024. If applications come in at the same rate, DEP may get another 100 totalling 508 applications.

In August of 2020 when the last permit fee increase was put in place, DEP estimated it would need the revenue from 2,000 unconventional shale gas permits a year to adequately support the regulatory program for both conventional and unconventional oil and gas drilling.

So, in calendar year 2024, DEP will again have a 75% shortfall in the revenue needed to support its Oil and Gas Regulation Program.

In 2023, DEP received just over 663 shale gas permit applications.

To make up for this loss of revenue, the Fy 2024-25 state budget included $11 million in taxpayer money to support the Oil and Gas Program.

The conventional oil and gas industry permit application fees rarely generate more than $46,000 a year to support a program that costs taxpayers $10.6 million to ensure compliance with state environmental laws and regulations.

Again, we find the oil and gas industry not paying its way because of the Act 13 impact fee and permit application fee structure Pennsylvania put in place.

NewsClip:

-- Reuters: US Oil,Gas Rig County Steady This Week, But Pennsylvania Falls To 17-Year Low, Baker Hughes Says

PA Oil & Gas Industry Public Notice Dashboards:

-- PA Oil & Gas Weekly Compliance Dashboard - October 19 to 25 - DEP Abandoned Conventional Well Violations Top 814; Conventional Owner Ignores Order; Gas Leaks & Spills [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices, Opportunities To Comment - October 26 [PaEN]

-- DEP Posted 78 Pages Of Permit-Related Notices In October 26 PA Bulletin [PaEN]

Oil & Gas - National Debate

-- NY Post: Fracking Could Decide The Election In Pennsylvania And Nationwide

-- Wall Street Journal Guest Essay: Fracking Isn’t As Popular (Or Important) In Pennsylvania As You Think; The Truth For Residents Is More Complicated [PDF of Article] - By Colin Jerolmack, Author Of Up To Heaven And Down To Hell and Sean O’Leary, Ohio River Valley Institute

-- Fox News: Ex-President Vows To Slash Energy Costs, Lift LNG Gas Pause And ‘Frack, Frack, Frack’ At Pennsylvania Rally

Related Articles:

-- Environmental, Health Groups Submit Petition To Environmental Quality Board For More Protective Setbacks From Shale Gas Wells For Schools, Daycares, Hospitals, Buildings, Drinking Water Wells, Surface Water [PaEN]