December 17, 2008

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New Marcellus Shale drilling fees approved

HARRISBURG – The Environmental Quality Board approved a Department of Environmental Protection request today to impose new fees for Marcellus Shale drilling permits that will replace the flat $100 permit fee with a variable fee structure based on well depth.

The new fee structure will help ensure adequate funding to cover program expenses for permit reviews and well site inspections. The fee increase will also allow the department to hire additional staff in Meadville, Pittsburgh and Williamsport to process permits and monitor drilling activities in the northcentral and northeastern areas of the commonwealth.

“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,” Environmental Protection acting Secretary John Hanger said. “Despite this substantial increase in workload, including permit review and inspection of oil and gas well sites, the department has not increased the $100 permit fee for oil and gas well permits since 1984.

“These permit fee increases will allow us immediately to hire additional staff to properly review Marcellus Shale permit applications and monitor drilling activities to ensure that our regulations are being enforced and our natural resources are being protected.”

Pennsylvania’s oil and gas act established a $100 permit fee for oil and gas well permits in 1984 and gives the department the authority to increase that fee to cover the cost of regulating the drilling industry.

The new fee structure sets a base permit cost of $900 for all Marcellus Shale wells up to 1,500 feet deep, and imposes an additional cost of $100 for every 500 feet of depth past 1,500 feet.  The increased fees will take effect in early spring.

Permit applications for Marcellus Shale gas wells must be thoroughly evaluated before a permit can be issued. Extracting natural gas from the Marcellus Shale formation requires significant amounts of water to hydraulically fracture the shale formation.

The department requires permit applicants to submit water management plans that outline how and where the water will be gathered, how it will be stored at the site, and how waste water will be processed and treated.

“With nearly 8,000 drilling permits issued so far this year and drilling taking place in areas of the state outside our traditional oil and gas region, we need to make sure that we have sufficient personnel to properly manage development of Pennsylvania’s Marcellus Shale natural gas reserves,” Hanger said.

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