EQB Proposes Substantial Increases in Permit Fees for Unconventional Wells

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Explore:  Fees Oil & Gas Permits

The Pennsylvania Environmental Quality Board (“EQB”) published its proposal to substantially increase the permit fees for “unconventional wells” in the PA Bulletin on September 14, 2013. The current average permit fee for nonvertical unconventional wells is $3,200 and $2,000 for vertical unconventional wells, calculated on a sliding scale based on well bore length. The EQB proposed a flat fee for nonvertical unconventional wells of $5,000 and $4,200 for vertical unconventional wells – a 56% and 110% increase, respectively. No changes to the current sliding scale permit fee for conventional wells are proposed.   

The proposed fees are purportedly needed to offset declining permit fee revenue (unconventional permit applications have declined by 22% since 2010) and increased operational expenditures associated with increased responsibilities as a result of changes to applicable statutes in 2012. The proposal indicates that the increased revenue will be used to streamline electronic review, including implementation of the ePermitting system which allows for submitting, processing and issuing permits online. Other IT “improvements” would include “[c]reation and deployment of a mobile digital inspection platform and mobile devices [that] will create marked improvement and efficiencies in terms of how the organization conducts site inspections.” According to the proposal, additional personnel are needed to review well pad and pipeline development permit applications, as well increased permits associated with “infrastructure development.”  

The proposed fee does away with the current structure, which is based on three classes of wells, two of which are based on the type of wellbore (vertical or nonvertical) and the third type based on the target formation, i.e, the Marcellus Shale. The proposal would create two classes of wells: “conventional wells” and “unconventional wells.” The proposal would define a conventional well as a “bore hole drilled or being drilled for the purpose of or to be used for the production of oil or gas from a conventional formation.” A “conventional formation” is in turn defined as a “formation that is not an unconventional formation.” The preamble acknowledges that “conventional wells” are basically defined by referring to the definitions of “unconventional well” and “unconventional formation” in 58 Pa.C.S. § 3203 – which is a bit unwieldy. The preamble, but not the proposed regulatory language, states that by referring to “unconventional” definitions in various statutes and regulations, the definition of “'conventional wells' includes: (1) any wells drilled to produce oil; (2) wells drilled to produce natural gas from formations other than shale formations; (3) wells drilled to produce natural gas from shale formations located above the base of the Elk Group or its stratigraphic equivalent; and (4) wells drilled to produce natural gas from shale formations located below the base of the Elk Group where natural gas can be produced at economic flow rates or in economic volumes without the use of vertical or nonvertical well bores stimulated by hydraulic fracture treatments or by using multilateral well bores or other techniques to expose more of the formation to the well bore.”  

The comment period on the proposed increases must be received by the EQB by October 15, 2013. Click to read the proposal as found in the PA Bulletin.