The Department of Conservation and Natural Resources Thursday released a fact sheet on Gov. Corbett’s proposal to lease additional state lands for natural gas development so long as the new leases do not involve additional surface disturbance that could raise an additional $75 million.
At DCNR’s budget hearing in February, Secretary Ferretti said the additional leasing would include deep, horizontal drilling from adjacent private land without additional surface impacts under State Parks or drilling from existing or planning well pads on State Forest land.
She said DCNR would be accepting proposals from drilling companies and would not offer specific tracks for lease.
The Governor will issue a new Executive Order specifically guaranteeing additional leasing will have no impact on surface impacts on state lands. She noted it is an opportunity to generate more funding without increasing taxes. The revenues will be prioritized for use within DCNR specifically under the Executive Order.
Secretary Ferretti added neither DCNR’s proposed budget or the Enhance Penn’s Woods initiative would be dependent on additional gas leasing.
Questions have been raised by a number of groups about what “non-surface disturbance” leasing means and as a response DCNR released this fact sheet. The text follows—
Q: What is the Governor’s proposal on additional leasing of state-owned oil and gas rights?
A: Gov. Tom Corbett proposes to generate new revenue through limited leasing of DCNR lands in a manner which prohibits additional surface disturbance on state parks and forests. This balanced approach will ensure that the special characteristics and habitats of DCNR lands are conserved and protected, while allowing for historic investments in environmental and conservation programs; public education; access to quality health care; and public safety, without raising taxes on Pennsylvanians.
Q: What does “non-surface disturbance of DCNR lands” mean?
A: “Non-surface disturbance of DCNR lands” means that no new or additional physical disturbance will occur on the surface of state forest or park land as a result of this leasing activity. Natural gas will be accessed through the use of directional and horizontal drilling.
Q: How much revenue does this proposal anticipate generating?
A: The proposed budget projects $75 million being generated from bonus payments for the right to develop natural gas deposited more than a mile beneath the ground. This revenue will help the Commonwealth make record investments in environmental and conservation programs; public education; access to quality health care; and public safety.
Specific areas and acreage will be analyzed by reviewing interest from operators who can access the gas through horizontal drilling without additional disturbance on the surface of DCNR lands.
Q: Would this proposal generate any revenue in addition to the bonus payments? How much?
A: Yes. In future years, production of gas underlying DCNR-managed land would generate royalty income for the taxpayers of Pennsylvania. It is difficult to estimate how much revenue, as that is dependent upon many factors, such as when wells are put into production, as well as the price of natural gas. DCNR typically commands a royalty rate of 18 percent or more of the value of the natural gas sold.
Q: How does the Governor propose to allocate future royalty revenues from new leases?
A: The governor will issue an Executive Order to prioritize the use of future royalty revenue in three key areas: state park and forest infrastructure improvements; acquisition of high-value inholdings; and acquisition of privately-owned oil and gas rights underlying high-value state park and forest lands which may not be suitable for drilling activity. DCNR estimates that approximately 80 percent of the oil and gas rights underlying state park land is privately owned.
Q: How does this proposal differ from prior DCNR leases for the development of unconventional natural gas?
A: DCNR has conducted three significant lease offerings during the modern Marcellus Shale-era: one in 2008 and two in 2010. These lease offerings generally limited surface disturbance on state forest land to no more than approximately two percent of the total acres leased.
Under the Governor’s proposal, no new disturbance would be authorized on the surface of state forest or park land. Natural gas would be accessed through surface activity which occurs on private, adjacent lands or from well pad sites which already exist or are planned under pre-existing leases.
The advent and refinement of directional and horizontal drilling allows for the recovery of natural gas through the use of laterals that can reach a mile or more in length and are typically located a mile or more underground.
Q: Does this proposal require legislative approval?
A: Under Act 18 of 1995, the General Assembly has already provided legislative authority for DCNR to enter into leases for the development of oil and gas underlying state forest and state park land. Legislative approval is necessary to appropriate any revenue generated from new leases.
Q: What investments does this budget make in Pennsylvania’s award winning state parks and forests?
A: As part of his budget proposal, Gov. Corbett outlined his Enhance Penn’s Woods initiative which would invest over $200 million in state park and forest infrastructure improvements over two years.
Enhance Penn’s Woods includes $45 million in Growing Greener Bond Act funds realized from bond premiums and interest, along with $57 million in capital budget commitments.
Additionally, other funding streams will be focused upon state park and forest infrastructure improvements. This initiative represents the largest two-year funding commitment to state park and forest infrastructure in the history of the Commonwealth.
Q: How does Executive Order 2010-5 affect this proposal?
A: The current executive order, issued in October 2010, prohibits the leasing of any land owned and managed by DCNR. While intended to protect the critical characteristics, habitat, and multiple uses of the surface land, the broad wording of this executive order precludes new leases which can avoid conflicts and disturbance on the surface of DCNR managed lands through the
utilization of directional and horizontal drilling.
The Governor will issue a new executive order that prohibits the leasing of lands owned and managed by DCNR which would result in any additional disturbance to the surface of state forest or park land. The executive order will also direct the use of future royalty revenue from new leases for three key areas: state park and forest infrastructure improvements; acquisition of high-value inholdings; and acquisition of privately-owned oil and gas rights underlying high-value state park and forest lands which may not be suitable for drilling activity.
A copy of the fact sheet is available online.
The proposal and a new report on the impacts of natural gas development in State Forests are expected to be discussed at the April 16 meeting of DCNR’s Natural Gas Advisory Committee.
For more information, visit DCNR’s Natural Gas Development and State Forests webpage.
