DEP Wants $5K Fee Per Well Permit

Official says he plans to meet with group

Morgantown Dominion Post
22 September 2011
By David Beard

West Virginia Department of Environmental Protection (DEP) Secretary Randy Huffman would like to go before the Joint Select Committee on Marcellus Shale in October to more clearly explain the agency’s needs and to propose a different permit fee — $5,000 per well.

That figure is a best estimate based on current information and the requirements of the emergency rules recently enacted, he told The Dominion Post on Wednesday.

Last week, the committee amended its draft Marcellus bill — a resurrected Senate Bill 424 from March — to include horizontal well permit fees of $10,000 for the initial well on a pad, and $5,000 for each subsequent well. On a six-well pad, that would generate $35,000.

Huffman explained some of the reasoning behind his revised figure.

Permit fees are the only means the DEP has to raise money to pay for inspectors and permitting staff. The DEP originally asked for $10,000 per well in the bill it offered the Legislature in January. That was “extremely high,” he acknowledged, but they didn’t know how the final bill would turn out.

It died, as did the Legislature’s own bill, SB 424.

Existing staff, including 15 inspectors now in the field, isn’t enough to meet the requirements of the emergency rules, Huffman said. The department needs more people in the office and in the field.

DEP General Counsel Kristin Boggs previously told the committee that only three to four office staffers handle all gas well permits — last year that was about 450 horizontal wells and nearly 1,000 conventional wells.

The DEP’s Office of Oil and Gas is dealing with a roughly $1.1 million annual shortfall because of changes in the industry, Huffman said. Conventional well permits dropped from about 3,000 per year to less than 1,000. While there were only 450 horizontal well permits, the workload has risen significantly while the income has dropped.

Huffman believes his proposed fee — $30,000 per pad, about $2.2 million total — would fill the financial shortfall, allow DEP to fill three vacant positions (two inspectors and one staffer) and nine other jobs to meet the requirements of the emergency rules.

Boggs previously said those nine would be six inspectors and three staffers.

Huffman said the difference between his proposal and the committee’s amendment might be about $400,000 to $500,000, but it will meet the immediate need.

Meanwhile, hiring the additional staff will take time — the better part of a year, he said. “Then we’ll be in a better position to evaluate what we need.”

It wouldn’t be right, Huffman said, to overestimate the need and collect an exorbitant fee. There’s an opportunity once every year to revisit the fee and make sure they’re tracking industry activity properly.

Huffman said that if he’s available, he would like to go before the committee himself during October interims — Oct. 11-13 — and explain more clearly the DEP’s needs and thinking. “We have an obligation to give them a better answer than we gave them last time.”

Members had expressed frustration that DEP staffers didn’t explain their position very well at this month’s interims.

Huffman cautions that whatever bill the Legislature ultimately passes could change things. “When you use numbers, people have a tendency to hold you to those forever. It’s not an exact science.” Determining a fee structure should be “evolution not revolution.”

His figure is based on the emergency rules. “If there are additional mandates on DEP from the bill, that could change the number. We haven’t fully evaluated the current bill.”

Huffman adds another caution: “As we continue to evaluate our emergency rule and the duties that are going to be associated with that, there’s no guarantee we might not revise that number downward.” The $5,000 is based on the best information they have now, projecting that into the next year.

Delegate Manchin Responds

Briefed broadly on Huffman’s points, Delegate Tim Manchin, D-Marion and House co-chair of the committee, said: “It’s frustrating. We’ve been trying to get accurate information on the needs of the DEP for quite some time.”

The DEP’s January proposal of $10,000 per well was reflected in the September amendment as originally proposed. The committee agreed to trim it to $10,000 and $5,000.

“It didn’t seem unreasonable to me.” It would have allowed DEP to put another 15 people on staff — in the field and in the office. “If the bill passes with the provision on public comment, they’ll probably need more people.”

But Manchin said he is willing to listen. “If they have some solid numbers and can provide more input, then I’m certainly willing to reconsider it.”

The problem is the lack of time, he said. At the end of the September meetings, committee members were talking about a November special session.

Asked about the mechanics of changing the fee, if members want to, Manchin said there are several ways.

One way would be for a member of the prevailing side — which is anyone on the committee since the amendment passed by unanimous voice vote — to ask to have it reconsidered.

Another way: Hash it out during House-Senate negotiations after the committee finishes the bill, and before it goes to the floor in a special session. “It could work out in that process,” Manchin said.

Both sides will likely amend the bill again during the session, it’s been said.

But broad agreement will be essential to get a special session called, and to get the bill passed, Manchin said.

“It’s got to be a cooperative effort,” he said.