Although Pennsylvania could eventually lease additional state forest land for natural gas drilling, it will likely be in small doses, according to the state’s top land manager.

“We will be looking at any opportunities on a case by case basis, and only for those type of leases that will have little or no impact on the surface,” Richard Allen, secretary of the Department of Conservation and Natural Resources (DCNR), told members of the state Senate Appropriations Committee during a recent budget hearing.

Around 1.5 million acres of the 2.2 million-acre state forest system overlie the Marcellus Shale and some 700,000 acres are currently leased for drilling. Shortly before leaving office then-Gov. Ed Rendell placed a moratorium on leasing any of the remaining 800,000 acres (see NGI, Nov. 1, 2010). Soon after taking office in November, Gov. Tom Corbett indicated he would gradually re-open state forests for drilling, but has yet to take steps in that direction (see NGI, Nov. 15, 2010).

“Because of the moratorium in effect, we are not addressing any discussions in regards to additional leasing now,” Allen said. “If and when the moratorium is lifted, we will be following the recommendations from the Marcellus Shale Advisory Commission.”

The commission recommended additional stakeholder reviews of permitting in forests, as well as a general policy that all future leasing have little or no surface impact.

Committee Chair Jake Corman, a Republican from central Pennsylvania, noted that at current gas prices, leasing additional forest land is not a major priority of industry.

Since its lease sales in 2008 and 2010, DCNR has issued 812 drilling permits on state forest land. Of those, 778 have also been approved by the Pennsylvania Department of Environmental Protection (DEP), 442 have been drilled and 152 are producing, Allen said. Statewide, Pennsylvania has issued 8,870 Marcellus permits since 2009, with 4,298 wells drilled during that period, according to data from the DEP.

While DCNR supports drilling in forests, the agency has a policy to not allow any drilling in parks where it owns the mineral rights, Allen said. But while DCNR owns 80% of the mineral rights in forests, it only owns 20% in parks. “By law, we cannot restrict anyone from accessing their mineral rights, but what we can do is enforce our guidelines and surface agreements to help minimize surface impact,” he said.

Development is an increasingly important revenue source for DCNR. In addition to the $378 million it received from the lease sales, DCNR expects to get 30% of its budget this year, around $65 million, from rents and royalties into the the Oil and Gas Lease Fund, Allen said. And with operators telling the state that production will likely increase, Allen said DCNR expects that amount to increase in the years to come.

But the proposed budget actually projects a decrease in revenue to the fund from last year, something that Allen attributed to the ongoing drop in natural gas prices.

Citing the “cut and raid” budget policies of the Corbett Administration, Sen. John Yudichak, a Democrat from northeastern Pennsylvania, questioned whether using the fund for administrative costs violated the intention of the account. Allen said the fund was created to address recreation, conservation, flood control and dams, and that DCNR carried out those functions on an administrative level, in addition to programs.

When pressed, Allen said DCNR obtained a legal opinion on the question.

In the days following the hearing, Pennsylvania Environmental Defense Fund (PEDF) sued Pennsylvania Gov. Tom Corbett and two top state officials, claiming that they were misusing revenue from natural gas development on state lands. The group claimed that the administration isn’t honoring the intention of the state’s Oil and Gas Lease Fund, a storehouse created in 1955 to hold rents and royalties collected from energy operations on state-owned lands. Although many of the decisions cited in the lawsuit date to the administration of former Gov. Ed Rendell, the case on file is against Corbett, Budget Secretary Charles Zogby and Treasury Secretary Robert McCord.

The PEDF claims that the Rendell administration leased 64,000 acres of state forests despite concerns about the impact of additional leasing from DCNR. By using $180 million from the fund to fill a budget gap, rather than to restore state lands, the state violated its responsibility to protect public resources, the PEDF claims. That claim arises from changes Rendell made in 2009, which gave the General Assembly the authority to allocate money from the fund, a responsibility traditional given to DCNR.

“By diverting use of the Oil and Gas Lease Fund away from DCNR’s control, DCNR cannot properly evaluate the cumulative impact of drilling on state lands, acquire gas rights beneath state parks to protect those parks from gas drilling, or acquire lands to replace those lands no longer available for public enjoyment because of the drilling,” the lawsuit claims. The group also claims Corbett is requiring DCNR to fund daily operations from the Oil and Gas Lease Fund, rather than the state General Fund.

“We’re confident that all expenditures from the oil and gas fund have complied with the state law,” Erik Shirk, a spokesman for Corbett, told NGI. Shirk also noted that no transfers from the fund have been made without the approval of the General Assembly and that none of the transfers mentioned in the legal filings took place during the Corbett Administration. “So it’s a little curious why it’s happening now,” he said.

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