Pa. regulators approve higher gas-drilling fees

HARRISBURG - With the natural-gas rush well underway across the state, environmental regulators have approved the first drilling-permit fee increase in 24 years.

The Environmental Review Board signed off yesterday on a proposal to increase the permit fee for drilling in the Marcellus Shale gas field from $100 to an average of $2,600 per well.

The new fees would help expedite the permit process by allowing the Department of Environmental Protection to hire an additional 60 staff members to review the growing number of permits in the field. It also would help the agency monitor well activities to ensure there is no environmental damage during drilling.

The shale formation sits 5,000 to 8,000 feet below the ground across roughly two-thirds of the state and likely holds trillions of cubic feet of natural gas. Improvements in technology and the rising price of natural gas have made it more feasible for companies to invest in exploration and drilling.

The proposal must still be approved by the general regulatory board and reviewed by the House and Senate Environmental Committees.

Industry officials say they understand the need for a fee increase, but think the proposed amount is too high.

Permit applicants will be charged a flat rate of $900 per well up to 1,500 feet deep and an additional $100 for every 500 extra feet drilled.

Stephen Rhoads, president of the Pennsylvania Oil & Gas Association, said with most wells ranging from 6,000 to 8,000 feet, the average fee would be about $2,600.

"We are generally in support of moving forward with a fee increase," said Rhoads. "With the new development in the Marcellus Shale, they need more staff."

But, he added, "it is a very significant increase over $100."

The fee increase approval process could take at least three months, Rhoads said.

John Hanger, the acting secretary of the Department of Environmental Protection, made the proposal in October in response to the flood of interest in the Marcellus Shale.

Hanger anticipates 40,000 oil and gas permits filed in the next three years, he said.

A Pennsylvania State University study estimates that the economic value of the formation is $1 trillion and that, for every $1 billion in royalties paid to Pennsylvania residents, nearly 24,000 jobs will be created over the next three years.

More than 500 permits have been approved for drilling operations in the Marcellus formation since 2005, half of them issued this year.

Gov. Rendell has proposed using $174 million from the sale of state land leases to companies that want to drill in the Marcellus Shale to help plug the ancticipated $1.6 billion state budget deficit.