New Castle News

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February 21, 2013

State agencies enjoy gas lease paydays

HARRISBURG — The Pennsylvania Department of Conservation and Natural Resources has made the biggest splash in leasing public lands to gas drillers.

But the two other agencies involved in protecting wildlife habitat in Pennsylvania also have been quietly using gas leases to generate millions of dollars in revenue.

Environmentalists say that fund crises have driven the agencies to make these deals with the gas companies, even if it means balancing the public interest in protecting habitat against the lure of a big payday.

“Anytime you incur extraction activity on public land, it creates an opportunity for conflict with recreational use, said Brook Lenker, with the Fractracker Alliance, a western Pennsylvania-based organization that has been monitoring the growth of the gas drilling industry.

The conservation department and the Pennsylvania Game Commission — the two largest landowners in the commonwealth, accounting for a combined total of 3.6 million acres of land — have leased more than 175,000 acres of land to gas companies for $438 million in one-time bonus payments, and an additional $106 million in royalty payments since 2008.

The conservation department conducted three lease deals, one in 2008 and two more in 2010, totaling $413 million and involving 138,000 acres. Since 2008, the state has received $100 million in royalties from gas wells on forestland.

There are no immediate plans to add more leases on state forestland, said Christina Novak, press secretary for the department of conservation and natural resources.

The Pennsylvania Game Commission meanwhile has received more than $24 million in bonus payments alone from deals with gas companies in the last two years. In addition, the commission has received more than $6 million in royalty payments.

In all, the commission has approved leases involving more than 41,000 acres, said Mike DiMatteo, chief of environmental planning for the Pennsylvania Game Commission. Of that, 15,000 acres are leased in non-surface use agreements, which allow companies to access gas under the property but do not allow them do anything above ground on the site.

At the game commission’s January meeting, two new gas leases — involving almost 1,800 acres in Washington County and Pulaski Township in Lawrence County — were approved, generating almost $5 million.

In addition, the game commission approved a lease on 11,900 acres in Lycoming in exchange for 6,200 acres in McKean County.

The Fish and Boat Commission received $5 million in lease payments and the agency hopes to employ similar leases on other commission land to help close a $9 million funding shortfall, executive director John Arway told the House Game and Fisheries Committee this week.

“In total, we manage 17,600 acres within the Marcellus region,” Arway said. “Under the best possible scenario, we believe those areas have the potential to generate up to a total of $1 million a year.”

An agency spokesman said that the $1 million would be in the form of royalty payments once additional leases are approved.

The Department of Conservation and Natural Resources placed its gas money in the Oil and Gas Lease Fund. It is intended to provide money for conservation and recreational uses. But the state has twice raided the fund to the tune of $383 million. Of the remaining funds, some has been used for operational expenses for the department, Novak said.

That irks environmentalists, who say the state should not be forcing the agencies that are supposed to be protecting the state’s land and wildlife resources to sell off mineral rights to pay their bills.

“These agencies are starved for funding. We do not think they should be forced to sell off an asset to get operating funds,” said Jeff Schmidt, chapter director of the Pennsylvania Sierra Club. “They are burning the furniture to heat the house.”

While the environmental group is generally opposed to drilling activities on public land, the organization thinks it is particularly bad policy to lease gas rights without setting aside the money to buy or build something tangible.

“The money is supposed to be used for conservation, to invest in new assets,” he said. “They could use it to build a new visitors center or campground or trails or add bathrooms to a state park or develop a new state park,” Schmidt said.

The game commission and fish and boat commission have both designated their gas money for specific, tangible needs. The game commission has used the revenue for land acquisitions, like the McKean County property acquired last month, DiMatteo said.

The fish and boat commission designates its revenue from gas leases toward repair work for dams.

(Email: jfinnerty@cnhi.com)

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