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Pennsylvania DCNR Would Get More Cash to Monitor Forest Drilling Under Wolf's Budget

General fund appropriations for the Pennsylvania Department of Conservation and Natural Resources (DCNR), which oversees hundreds of thousands of acres of state forest land leased by oil and gas drillers, would more than double under Gov. Tom Wolf's 2015-2016 state budget.

Under Wolf's plan, DCNR's general fund allocation would go from its current $14.5 million to $34.2 million to offset and make it less dependent on money it receives from the state’s Oil and Gas Lease Fund. Acting DCNR Secretary Cindy Dunn also told the House of Representatives' Appropriations Committee during a hearing on Monday that the agency's proposed operating budget for the next fiscal year, which begins July 1, would increase by about $8.3 million.

In one of his first significant moves as governor, Wolf signed an executive order in January reinstating a moratorium on oil and gas leasing in state-owned parks and forests. His move reversed an executive order issued by his predecessor, Gov. Tom Corbett, who had sought to raise money to plug a widening state budget gap (see Shale Daily, Jan. 29).

Dunn, who previously served as president of environmental advocacy group PennFuture, said during testimony that "DCNR agrees that [Wolf's] approach recognizes the immense ecological and recreational value of Pennsylvania's state parks and forests."

Dunn added that Wolf's budget proposal maintains funding for geologists and scientists who help oversee oil and gas development in state forests.

"This approach allows the department to focus staff resources on managing existing and future development; continue to monitor impacts of gas extraction; refine guidelines and management practices, and fully engage stakeholders on impacts to a full suite of state forest values," she told lawmakers regarding the ban.

The state has 385,400 acres under lease for oil and gas development. There are currently 117 active leases generating revenue for the state. Since its first Marcellus Shale lease in 2008, DCNR has approved 227 well pads and 977 shale gas wells in state forests.

Earlier this year, the agency said it discovered that some Marcellus operators could be wrongly deducting post-production fees from royalties paid to the state under land they have leased in public forests (see Shale Daily, Jan. 9). As development on state-owned land has spiked, DCNR has hired another accountant in its Bureau of Forestry and has brought on outside consultants to audit the volumes of oil and gas produced on the land.

With the additional Data, the agency said it realized that a number of undisclosed producers could be deducting post-production costs related to transport and processing, which the state's leases prohibit.

At the budget hearing, Dunn said DCNR is preparing to take bids for an independent audit that would look into the numbers further and vet the work that has already been done in-house. In January, a DCNR representative told NGI's Shale Daily that if the agency does discover improper deductions, it will first try to resolve the issue through negotiations.

DCNR isn't the only organization to raise concerns in Pennsylvania about post-production costs. Dozens of landowners have challenged operators in state courts, and the state Attorney General's office is said to be investigating the issue as well (see Shale Daily, Jan. 2; Aug. 29, 2014).

Wolf's budget would also provide a 5% increase from the state's general fund to the Pennsylvania Department of Environmental Protection, which regulates the oil and gas industry (see Shale Daily,March 13). Budget hearings are set to last through April 1. By law, the state must pass a budget by July 1.

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