August 16, 2011

DCED Secretary Says More Drilling On State Forest Land Could Raise Over $60 Billion

In a interview Tuesday, Department of Community and Economic Development Secretary C. Alan Walker said new drilling on State Forest land could bring in $60 billion over the next 30 years to "solve just about every economic problem we have."
            Walker was quoted as saying, "But the way I look at it, the potential royalty income to the state of Pennsylvania-- at a 15 percent or 18 percent and a half percent royalty rate-- over the next 30 years, if we do lease the state land, is close to $60 billion.  That allows us to solve just about every economic problem we have that is hanging out there, including unfunded pension liability, infrastructure problems.
            "In my opinion, we'd be foolish not to use that money.  The way I look at it is that truly is the Commonwealth of the state of Pennsylvania and it should be used to solve Commonwealth problems, not one regional problem or a county problem.  That truly is where you get your resources to solve statewide problems.
            "The way the drilling platforms are being set up today, where you may only have to have one pad every so many square miles, it's a minium impact on the State Forest property, and in a matter of a couple years, it's going to be re-vegetated," Secretary Walker explained.
            To achieve the revenue envisioned by Secretary Walker, drilling would have to be increased by at least six times the current rate to bring in $60 billion over 30 years.  The question is whether there are enough remaining State Forest lands attractive enough for drillers to lease to meet that revenue estimate, especially given environmental concerns.
            According to the Department of Conservation and Natural Resources natural gas impacts analysis, "no additional leasing involving surface disturbance can occur without significantly altering the ecological integrity and wild character of our State Forest system."
            The Rendell Administration leased about 137,000 acres of State Forest land for Marcellus Shale drilling before issuing a moratorium on more leasing a month before last November's election.  There are about 700,000 acres of the 2.2 million acres of State Forest land containing natural gas deposits of all types, including Marcellus Shale.
            So far, Gov. Corbett has not proposed leasing any more State Forest land for development and the FY 2011-12 state budget is not based on any increased leasing.  About $63 million in royalty income is expected from the leases already developed and producing for this fiscal year increasing to about $300 million per year in 10 to 15 years.
            The Governor's Marcellus Shale Advisory Commission report issued in July recommended any future leasing of State Forest land should be limited to agreements which result in no or minimal surface impact to state-owned land, and prohibits surface disturbance in high conservation value forests and other ecologically important areas.
            At his Senate confirmation hearing in May, DCNR Secretary Richard Allan said there have been no discussions about changing the moratorium on leasing more Marcellus drilling on State Forest lands.  He said he and his staff have been focusing on developing best management practices and a better drilling monitoring program.
            With respect to enacting a drilling impact fee, Secretary Walker was quoted as saying, "I think the impact fee, if it goes through, to be fair should be used where the impact was had, not in a county that doesn’t have any natural gas production or where there hasn’t been any impact. It really should go make sure the roads are maintained, if there’s a big influx of population, you have to help with the school systems – it really should be an impact fee that goes to the communities and counties that are feeling the impact.”
            Walker's statement puts him at odds with Sen Joe Scarnati (R-Jefferson) and many House Republicans who said drilling fees could be use for statewide purposes ranging from plugging abandoned oil and gas wells to funding county conservation districts and renewing the Growing Greener Program.
            Over the last nine years, mostly during the Rendell Administration, $1.5 billion has been cut or diverted from environmental protection and restoration line items in balance the state budget or support program which could not get funding on their own, the award-winning Growing Greener Program has become all but bankrupt and over 600 of what was 3,200 positions at the Department of Environmental Protection have been eliminated.
            Funding and complement levels at both DEP are now below 1994 levels.