American Oil and Gas Reporter - February 2020 - 18

IndustryDigest
Pennsylvania Senate and House of
Representatives as well as the state's
Independent Regulatory Review
Commission.
Permit fees, along with fines and
penalties, are the primary source of
funding for DEP's oil and gas
program, and the reports say DEP has
received far fewer permits than the
2,600 a year it anticipated getting the
last time it raised fees in 2014. After
processing 2,531 APDs in fiscal 2015,
the reports indicate, DEP received
only 1,693 applications in FY 2019
and is on pace to receive fewer than
1,600 this year.
Scott Perry, DEP secretary for the
Office of Oil and Gas Management,
says the oil and gas program has shrunk
from 226 to 190 employees since 2014
and its operating costs have been
reduced by 38%. Nevertheless, Perry
maintains the fee increase is necessary
to maintain the program in its current,
reduced state.
"We are failing to meet many of our
goals-our inspection goals, our permit
review time frame goals, and our
policy and program development
goals," Perry is quoted. "We have
information technology projects that
are going unmet, often because we
cannot fund the positions necessary to
do that work."
The Pennsylvania Independent Oil &
Gas Association, which emphasizes that
permit fees for conventional wells will
remain unchanged, says it objects to the
size of the increase, but agrees with
DEP that a legislative solution is needed
to provide more stable funding to the oil
and gas program through the annual
state budget process. ❒

Phase One Deal
Includes China Buying
More U.S. Energy
WASHINGTON-Although extensive
details remained elusive, a few more
specifics came to light when President
Donald Trump signed a "phase one"
trade deal with China in mid-January.
Those provisions include a pledge from
China to purchase at least $52.4 billion
more in U.S. energy products, media
reports note, but no move from the
Chinese government to remove tariffs
on U.S. crude oil and natural gas.
Press accounts site Goldman Sachs'
estimates that China may boost its
consumption of U.S. crude by 500,000
barrels a day in 2020 and by 800,000
bbl/d in 2021, while increasing its
liquefied natural gas imports to 10
million tonnes this year and 15 million
in 2021. U.S. LNG and crude exports to
China have fallen sharply since the
onset of the trade war.
Wood Mackenzie Asia Pacific Vice
Chair Gavin Thompson says China's
promised purchases are noteworthy, but
so are the enduring tariffs. "Let us be
clear: $52.4 billion over two years is a
lot of energy. But neither the 5% tariff
on U.S. crude oil nor the 25% tariff on
U.S. LNG is to be reduced or removed
by China under the phase one deal. For
China to massively increase imports of
oil and LNG from the United States
while tariffs remain in place is going to
be challenging.
"Consider LNG," Thompson
continues. "In 2017, Chinese imports
from the United States were
approximately 1.5 MMt, worth around

$600 million. If China is to increase the
value of U.S. LNG imports
considerably as part of this agreement,
let us say to around 10 MMt in 2021,
then the 25% tariff would need to be
either absorbed by the importing
company or passed through to the
consumer."
According to published reports, IHS
analyst Jenny Yang concurs. "We expect
the Chinese government to remove,
reduce or approve tariff exemptions
before incremental LNG imports from
the United States can be meaningful,"
she is quoted.
Press accounts note that Chinese
officials say the energy purchases will
be "market driven."
In other trade news, Trump signed
the U.S.-Mexico-Canada Agreement in
late January after the Senate passed the
deal a couple weeks earlier. The deal
will take effect after all three countries
ratify it. The United States and Mexico
have done so and, published reports
indicate, Canada's parliament was
expected to do so shortly after
reconvening near the end of January. ❒

Federal Suit Aims
To Block Leases
In Five States
WASHINGTON-A federal lawsuit
seeks to block the leasing for oil and
gas development of 2 million acres in
five western states. The WildEarth
Guardians and Physicians for Social
Responsibility are challenging the
Bureau of Land Management's approval
of 2,067 leases from 23 lease
authorizations in Colorado, Montana,

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American Oil and Gas Reporter - February 2020

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