The governor of New York, David Paterson, recently announced the possibility of layoffs for government agencies across the state including the New York Department of Environmental Conservation (DEC). The DEC is the agency that is responsible for oil and gas permitting and enforcement in the state and the potential layoffs could eliminate over 200 positions in the agency. The irony of this is that New York continues to enact a moratorium on drilling in the state and with the revenue generated by permit fees and associated oil and gas drilling fees the state could alleviate some of their financial strain. In this blog we are going to look a little further into the possible revenue the state could take in on drilling permit fees alone when/if the moratorium is lifted.
Due to the ongoing moratorium we do not have an adequate permit sample set for the state of New York so we will look to the state that shares a state line in the Marcellus, Pennsylvania. In an effort to get a comparable Marcellus permit count from Pennsylvania we will look at permits of the counties that border New York and that are permitted for the Marcellus Shale. Also to keep our analogous sample current we will only pull permits that were granted in the last year. The below is a map from HPDI Online of Pennsylvania permits granted in the last 365 days in counties that share a border with New York State. From this map and the queried data we gather 2 bits of information that will help us with our revenue estimate, permit count of 1564 and average permit depth of 6328’.
Now to help turn permits into money we will use the DEC Well Permit Fee Calculator on their website. The calculator takes true measured depth, or proposed depth, in feet in an input box and when the “calculate” button is clicked it generates the Total Fee. When using this calculator with our average Pennsylvania permit depths we get the total fee of $2,570 per permit. Now we are going to take that number and multiply it by the number of permits in our analogous sample set, 1564 permits, and we get a total of $4,019,480 for the last year.
To provide even more color as it relates to New York, the following map shows the extent of the Marcellus into New York and depths. We can see that the depths are somewhat shallower than our Pennsylvania sample set but even with those depths there is still money to be made for the State as seen in our permit fee table.
Now, this blog only looked at the potential revenue based on permit fees but there are more economic benefits to drilling in New York’s Marcellus play similar to what we see in Pennsylvania. To get a bigger picture of the benefits one would also have to look at things such as new jobs, increase revenue in local businesses, increase in revenue from resulting taxes, etc…
To learn more visit the Regulatory, Environmental Info folder in the Unconventional Updates in DI’s DNA.