Drilling permit fee hiked amid debate over its necessity

A federal drilling permit application fee first implemented a few years ago and increased this month by $2,500 should raise $45.5 million to pay for the government’s costs for processing oil and gas permits.

Bureau of Land Management spokesman Tom Gorey said the $6,500 fee goes to the U.S. Treasury to cover BLM work that among other things involves conducting environmental reviews associated with the proposed drilling.

Mike Chiropolos, lands programs director for the Western Resource Advocates environmental group, said it’s only fair for the energy industry rather than taxpayers to pay for such costs.

He said it’s no different from charging fees for things such as building permits.

“Generally when a private party comes in and wants the government to do something for them, they’re expected to pay the cost,” he said.

But Marc Smith, executive director of the Independent Petroleum Association of Mountain States, questioned charging the industry for an activity that he said produces about $112 in royalty, tax and other government revenues for every dollar the BLM spends administering its oil and gas program.

“I don’t know of any other program in the federal government that produces that kind of return on investment,” he said.

Chiropolos said such calculations don’t consider the industry’s impacts on air, water, wildlife habitat and public health.

Congress first implemented the $4,000 fee for the 2008 fiscal year. Interior Secretary Ken Salazar’s budget included the fee increase proposal. Gorey said the increase should raise another $10.5 million for the 2010 fiscal year. The fee generated $35 million for the 2009 fiscal year.

Smith said his group opposes the fee because it has resulted in “no reciprocal improvement in permitting time frames and no effort to make the process more straightforward and predictable.”

Smith said that in terms of cost, the fee pales in comparison to numerous Obama administration budget proposals to repeal tax measures that help encourage energy production. Still, it’s one more hindrance to reviving natural gas development in places like western Colorado, he said.

He thinks it also would be more fair to charge the fee upon approval of a permit rather than at the application stage because permitting delays can result in wells not being drilled.

Chiropolos said a benefit of the fee is that it can help serve as a disincentive against companies submitting applications on a speculative basis when they’re not sure they intend to drill.

“That’s going to take staff time and government resources to process those,” he said.


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