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Office of Oil & Gas sees significant decrease in revenue and permit applications

COVID-19 has taken a toll on the state office that oversees oil and gas production.

James Martin, chief of the Department of Environmental Protection’s Office of Oil and Gas recently told DEP’s Environmental Protection Advisory Council,
“We are experiencing a particularly substantial decrease in our revenue stream.”

That means staff downsizing and a search for other money sources, he said.

COVID-19 has slowed permitting and OO&G is entirely dependent on permit fees, he said. Figures DEP spokesman Terry Fletcher provided to The Dominion Post — in an email exchange — show Fiscal Year 2020 revenue is less than half of previous years.

The office typically sees 35 to 40 permit applications per month, Martin said. January was about on par, with 33. Then they fell off: 19 in February, six in March, five in April. With The Comeback the state’s reopening plan, permits picked up a bit but not enough: 16 each in May and June.

Fletcher provided a picture of annual OO&G revenue: $3.4 million each in FY 2017 and 2018; $3.3 million in FY 2019; $1.6 million this year, which ends June 30.

Office staff will be cut from 40 to 25, Martin said. That will include inspectors and permit review people. “It’s going to be a big change for us. We’ve never seen anything like it before.”

Fletcher said downsized staff won’t be laid off but moved to different divisions and offices within the DEP that have existing vacancies. Those moves have already started.

Based on current projections, Fletcher said, OO&G expects to bring in about $1 million in FY 2021 into its operating fund and would need roughly an additional $1.5 million to operate with the reduced staff.

Downsizing will save the office money, Martin said, but they still have to find more money. They’ll be looking at that, and it may lead to proposed legislation.

Fletcher said DEP is already looking for ways to redirect appropriate internal funds to OO&G. “Measures such as fee hikes or having additional money appropriated to the WVDEP from the General Revenue Fund will need legislative approval.”

What the Legislature might do is an open question. Last session, legislators passed HB 4091, which set up a process and fee structure for expedited horizontal gas well permitting. The bill devotes half of the fee income, up to $1 million, to OO&G and half plus anything above OO&G’s $1 million to orphan well capping.

But this is an election year, and it’s unknown who will return in January. Already, three of the four top leaders aren’t returning: Senate President Mitch
Carmichael lost his primary bid to a Republican challenger while both minority leaders — Sen. Roman Prezioso and Delegate Tim Miley — did not seek reelection.

The remaining leader, House Speaker Roger Hanshaw, said in an email exchange, “I am aware of the situation currently affecting the DEP, which is due to a steep decline of drilling activity during the pandemic. If there is a desire to provide additional revenue to avoid employee layoffs, we would expect the governor’s office to submit that to us in either a supplemental appropriation or their upcoming fiscal year budget request. We would consider that request, like all others, as part of our regular legislative process.”

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