The state Department of Environmental Protection is proposing to increase permit fees for Marcellus Shale and other unconventional natural gas wells by an average of between $1,000 and $1,800 to keep pace with the growing costs of regulating new wells and pipelines.
The proposal, which is scheduled for discussion at the department's oil and gas technical advisory board meeting on Tuesday, recommends changing the current sliding fee scale based on the length of a well bore to a flat $5,000 fee for horizontal unconventional wells and $4,200 for vertical unconventional wells.
The average permit fee for a Marcellus Shale well is currently $3,200, according to the department's analysis.
The proposal recommends leaving fees for conventional, usually vertical, wells unchanged.
The changes are necessary because the department is taking on more work as more wells are drilled plus new duties outlined in an updated drilling law passed last year, according to a program cost analysis DEP posted online. DEP's oil and gas program is funded entirely by fines, fees and permit revenues.
While Marcellus Shale permit applications have declined 3.5 percent since 2010, the number of Marcellus wells drilled has increased 23.5 percent, according to the department's analysis.
More work combined with fewer permit fees "creates a situation where the incoming permit revenue is insufficient to cover the current operational costs of the program, not allowing any room for flexibility in terms of future staff and resource needs," according to the analysis.
Without a permit fee increase, the department's ability to maintain and improve its level of operations "will be compromised," the analysis says.
The department estimates that it will receive $14.7 million in well permit fees in fiscal year 2014-15 if the increase is adopted, rather than the $7.4 million it expects to receive with the current fee structure.
The proposed fee increase would allow the department to hire 28 new staff members, including engineers, inspectors and subsurface policy specialists, DEP spokesman Kevin Sunday said. The hires will be staggered "to ensure that our revenues will continue to support the additional staff for the long term," he said.
The oil and gas program currently employs 202 people, up from 64 in 2004.
After discussing the proposal with the advisory board, the department will submit it to the Environmental Quality Board for review, Mr. Sunday said. DEP estimates that the fee increase could be adopted next spring.
Permit fees for oil and gas wells were $100 for nearly 25 years before the sliding scale was implemented in 2009 to accommodate the new demands of Marcellus Shale development.
The Marcellus Shale Coalition, an industry organization, does not oppose the proposed fee increase, a spokesman said.
Contact the writer: llegere@timesshamrock.com