Tuesday, March 27, 2018

House Ag Committee: Is A $50M PennVEST Loan To Buy Forest Land The Best Use Of That Public Funding?

The House Agriculture and Rural Affairs Committee Monday held an information meeting on the $50 million in loans the PA Infrastructure Investment Authority made to Lyme Timber Company to help the private company buy 60,103 acres of private forest land in 6 Northern Tier Counties.
The main issue before the Committee, said Rep. Martin Causer (R-Cameron), Majority Chair of the Committee, was whether loaning $50 million in public money to Lyme Timber Company was the best use of that money in terms of the benefits gained by the public and the environment.
By way of background, PennVEST approved two loans in October and February totalling nearly $50 million to enable Lyme Timber to buy 61,103 acres of private forest land in Cameron, Clinton, Elk, Jefferson, McKean and Potter counties and create 50 forest-related full-time jobs.
Lyme Timber spent $140.6 million in total to purchase the 60,103 acres.
The agreement also calls for 9,362 acres to be included in a working forest conservation easement to sustainably manage the forest, broaden access to public recreation and hunting and to preserve, protect and improve water quality.
There is an option to allow DCNR to acquire additional conservation easements on the remaining 50,741 acres during the next 7 years.
The property includes a $700,000 acid mine drainage restoration project, of which Lyme Timber will fund $550,000, within the Sterling Run tract in Cameron County.
The funding for this project came from a combination of state funds approved by voters, federal grants to PennVEST from the U.S. Environmental Protection Agency and recycled loan repayments from previous PennVEST funding awards.
Comments on the loans were provided to the Committee by DCNR Secretary Cindy Adams Dunn, PennVEST Executive Director Brion Johnson and by several other individuals from the affected region.  Lyme Timber Company project summary.
In lieu of reading their prepared remarks, both Dunn and Johnson answered questions from Committee members.
DCNR Secretary Cindy Adams Dunn told the Committee the agency supported the loans because it is concerned about changes in ownership of the 70 percent of forest lands that are privately owned in Pennsylvania that could cause land subdivision and fragmentation and the impacts that would have on water quality and the forest products industry.
Dunn said the concerns about fragmentation came, in part, from DCNR’s Green Ribbon Task Force which made recommendations on how the state could take better advantage of the state’s forest resources to promote the forest-related product industries and environmental improvement.
Rep. Dan Moul (R-Adams) said his impression was PennVEST funding was used for drinking water and wastewater projects and the $50 million devoted to this forest project would be better used to fund more of those kinds needed community projects.
Brion Johnson said PennVEST has not turned down any water or sewer project that has come to his agency for funding since 2015.  He said he has heard concerns about some communities getting loans rather than grants, but no one has been deferred since then.
In response to a question from Rep. John Lawrence (R-Chester), Johnson said, like any applicant, Lyme Timber applied to PennVEST for funding and had to justify the benefits and the viability of the applicant.  There was no bidding-type process for the funding, as suggested by the Representative.
He said the application included a financial capacity analysis, a water quality benefits evaluation and a review of economic development benefits.
Sara Nicholas, Policy Director for DCNR, said these loans were a great deal for the public because the public receives the conservation, clean water and recreation benefits of the 9,550 acres that will be subject to a conservation easement for one-third the cost of buying the land outright.  Dunn echoed her comments and said this project also keeps the forest land in private ownership and on the tax rolls.
Rep. Causer expressed a concern about whether this even qualifies as a “project” that would be funded by PennVEST given the language in the 1988 statute that created the agency.
Johnson said it is an eligible project under PennVEST’s own law and policies and is eligible for funding with federal Clean Water Revolving Loan Funds.  He said both the U.S. Environmental Protection Agency and PennVEST’s chief counsel confirmed this position and he would be happy to share that information with the Committee.
In response to a question from Rep. Kate Klunk (R-York) on whether Lyme Timber would have bought the land without the public funds from PennVEST, DCNR explained Lyme had a business model they have used in the 14 other states they work in to use Clean Water Revolving Funds for these purposes and they applied it here in Pennsylvania.
Johnson said the Lyme Timber was the first opportunity his agency had to work with the timber industry to fund a project that has water quality and economic development benefits. He noted his written testimony included letters of support from local governments and a variety of groups.
Johnson pointed to New York as an example which used Clean Water Revolving Loan funds to protect the New York City drinking water watershed by purchasing land.
He said this kind of project is a cheaper option than constructing and operating a facility like a wastewater plant or water filtration plant to achieve the water quality benefits.
Johnson said PennVEST has a similar application being reviewed now for a $20 million forestlands project in Elk County by a conservancy.  [A later witness said this one involved about 20,000 acres of land and added a third application may be coming.]
Johnson noted more traditional water infrastructure projects will get preference for funding before a project of this type would be considered by PennVEST.
Rep. Russ Diamond (R-Lebanon) asked if the General Assembly can stop this loan.  Johnson said there is an offer on the table at this point approved by the PennVEST Board, but the loan has not closed.  He said he’d have to look at that with his chief counsel.
Johnson said PennVEST anticipates completing settlement on the loans in June at which time all the details of the conservation easement, collateral and other issues would be resolved.  
In response to a question about the ownership of the mineral rights for the properties involved by Rep. Lawrence, Dunn said DCNR is now working its way through an evaluation of who owns those rights.  At this time, she said, DCNR has not identified the mineral rights owners, but they do know a majority of the rights are severed, which means other people or companies own them.
Johnson said Lyme Timber told PennVEST they are not interested in he mineral rights, but said he would go back to the Company and follow up again on the issue.
Rep. Causer asked whether the land will be open to public hunting, given the public investment.  John Norbeck, Deputy for Parks and Forestry and Secretary Dunn said DCNR’s position is any land covered by the conservation easement will be open to public hunting and recreation like DCNR lands, unless there are leases already in place with private hunting clubs.
In response to a question, Johnson said if Lyme Timber sells the land before the 20 year loan is paid off, the deal is structured so that they must pay off PennVEST right away.
Keith Klingler, PA Landowners Association and owns and manages 3,000 forest lands, expressed concerns about using PennVEST monies could have been used to reduce sewage ratepayer monthly bills from $15 to $30 rather than to give timber company a low interest loan.
Klingler said he believes most, if not all, of the land covered by the Lyme Timber project is enrolled in the Clean and Green Program that provides property tax breaks for keeping the land in forests and help prevent development.
Copies of written testimony and handouts available: DCNR Secretary Cindy Adams Dunn, Brion Johnson, PennVEST;  Keith Klinger, PA Landowners Association, Arthur Stewart, Caledonia Land Company; Tyler Martin, Caledonia Land Company; Lyme Timber Project Summary..
Click Here to watch a video of the hearing (when posted).
Rep. Martin Causer (R-Cameron) serves as Majority Chair of the House Agriculture Committee and can be contacted by sending email to: mcauser@pahousegop.com. Rep. Eddie Day Pashinski (D-Luzerne) serves as Minority Chair and can be contacted by sending email to: epashins@pahouse.net.
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