The Environmental Quality Board (EQB), a quasi-legislative body that promulgates regulations for the Department of Environmental Protection (DEP), voted yesterday to increase the base permit fee for all Marcellus Shale wells up to 1,500 feet deep to $900, with $100 fee increases for every 500 feet of depth past 1,500 feet.

This is the first permit fee increase in almost 25 years, as the current fee of $100 was fixed when the current Oil and Gas Act went into effect in 1984. The fee increase is expected to be effective sometime in the early spring upon publication in the Pennsylvania Bulletin. For example, once the increase goes into effect, the drilling permit fee for a 10,000-foot Marcellus Shale well will increase from $100 to $2,600.

Based on an executive summary issued by DEP in connection with the EQB's decision, DEP clearly intends to use the additional revenue to step-up its review of Marcellus Shale permit applications. DEP noted that it is expending additional time and money to address the primary environmental concern associated with drilling in the Marcellus Shale — the use of massive amounts of water for hydraulic fracturing.

DEP also hinted that it specifically intends to use additional revenues to increase its regulation and monitoring of the amount of water withdrawal from watersheds, the use and storage of water at well sites and the management, treatment and disposal of contaminated wastewater that is removed from the wells after the fracturing process. DEP intends to hire additional personnel for its offices in Meadville, Pittsburgh and Williamsport to support its oversight of these concerns.
    
DEP also anticipates receiving 40,000 new Marcellus Shale drilling permit applications in the next three years. Given the substantial increase in the permit fee, and the number of anticipated permits, DEP plans to have substantially more resources to scrutinize permit applications. Operators could experience delays in receiving their permits due to the volume of expected applications and DEP's desire for increased scrutiny, though the increased staffing may mitigate significant delays. In addition, it is likely that DEP will use the extra revenue to actively manage operators' compliance with the conditions set forth in the permits.