Thursday, December 18, 2008

Penn Natural Gas Fees to Climb

By Rick Stouffer
Wednesday, December 17, 2008

The Pennsylvania Environmental Quality Board on Tuesday approved rules that would sharply increase permitting fees for companies drilling into the natural gas-rich Marcellus Shale formation.

For the average Marcellus Shale horizontal well that stretches 10,000 feet down and then across the shale formation, the permit cost next spring would jump to $2,600. That's up from the $100 fee, regardless of depth, that was adopted in 1984.

"Due to technological advances in drilling and rising natural gas prices, gas exploration in the commonwealth has increased significantly with 40,000 new drilling permits anticipated during the next three years," said John Hanger, acting secretary for the state Department of Environmental Protection.

DEP estimates the new fee structure will bring in an additional $3 million a year for the department. Proceeds will be used to hire 37 DEP staff to review Marcellus Shale permit applications and monitor drilling activities statewide.

Sixteen of the new employees are to be based in Pittsburgh, DEP spokesman Tom Rathbun said yesterday.

"We'll be hiring oil and natural gas inspectors, water quality specialists, environmental engineers, technical staff like geologists and office permitting staff," Rathbun said. Oil and natural gas inspectors will be paid between $41,017 and $62,338, the DEP said.

Trade associations and independent oil and natural gas exploration-production companies doing business in the Marcellus formation generally were supportive of the fee increase.

"The additional fees will help the DEP expand its resources to match increased activity in the Marcellus," said Matt Pitzarella, spokesman for Fort Worth-based Range Resources Corp., with an office in Cecil in Washington County. "Ultimately, this should help foster Marcellus development, which will add good-paying jobs in Pennsylvania and boost the state's economy."

Steve Rhoads, president of the Pennsylvania Oil & Gas Association, said his organization generally supports increased fees -- those pertaining strictly to Marcellus Shale drilling, and others for different types of oil and gas drilling programs.

The 20-member Environmental Quality Board, chaired by the DEP secretary, is an independent board that decides on all DEP regulations.

Rathbun said now that the board has approved the increase, it goes to the Independent Regulatory Review Commission, which considers whether all agency regulations are in the public's interest. Finally, the state attorney general must approve the increase.

Rick Stouffer can be reached at or 412-320-7853.

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