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Ohio Senate Passes Bill Allowing Drilling on State Land

June 16, 2011
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The Republican-controlled Ohio Senate passed Substitute HB 133 by a 22-10 vote on Wednesday. The measure creates a five-member Oil and Gas Leasing Commission (OGLC) and opens land owned by the state -- including state parks but not nature preserves -- to oil and gas leasing.

The bill now moves on to Republican Gov. John Kasich for his signature. Kasich is believed to support the bill -- which passed the state House of Representatives by a 54-41 vote on May 25 -- because it would generate revenue for Ohio, a state crippled by an $8 billion deficit (see Shale Daily, May 26; May 23; March 8).

Six last-minute amendments by Sen. Michael Skindell (D-Lakewood) were tabled by the Senate, including calls for a moratorium on hydraulic fracturing, until the U.S. Environmental Protection Agency completes a study on the practice, a ban on drilling under Lake Erie, and for having the state attorney general outline requirements for oil and gas leases.

"What we know about hydraulic fracturing is that it takes an incredible amount of water to get this gas out," Skindell said, adding that he had a total of 17 amendments but decided to only introduce six of them. "They will be shipping truckloads and truckloads of water to do that. It will be a huge disruption to our state parks and our communities."

Sen. Bill Coley (R-West Chester) was one of several Republicans urging the bill's passage.

"I wonder what the Luddites would have done if they could have come to the General Assembly and voted against technology and hydraulic fracturing," Coley said. "We are being asked to throw back technology out of fear of contaminating water tables that are thousands of feet above where the fracking is going to take place."

Under HB 133, the OGLC would have five members serving five-year terms. Kasich would appoint four members, two of whom would be recommended by the oil and gas industry, one would have a background in finance or real estate, and one would be tapped by environmentalists. The final member -- who would also serve as OGLC chairman -- would be the chief of the Ohio Department of Natural Resources (ODNR) Division of Geological Survey.

Although HB 133 repeals the authority some state agencies and universities currently have to enter into oil and gas leases, any leases currently in effect would continue until their expiration date.

HB 133 also establishes four classifications for all property owned or controlled by a state agency and requires each agency to inventory and classify every parcel of land it owns. During the interim period between the bill's passage and the OGLC adopting an oil and gas leasing program, state agencies would be allowed to lease their parcel provided they consult with the OGLC beforehand.

The bill also creates royalty funds to benefit state agencies, forests, parks and wildlife habitat, and requires that at least 30% of the proceeds from a lease on state park land is used by the ODNR to make capital improvements in that specific park.

"This is a win-win bill," said Sen. Cliff Hite (R-Findlay). "Our state parks are running down. They need assistance. Jobs are going to be created and we're also going to be relieving some of these energy costs. We're going to do it right and we're going to do it well."

Still, environmentalists remain opposed to the bill.

"We feel this is a disappointment," Trent Dougherty, an attorney for the Ohio Environmental Council (OEC), told NGI's Shale Daily on Wednesday. "We consider these areas, such as our state parks, to have been set aside as being protected and off limits to industrial activity. It was a promise made generations ago by our General Assembly and that promise is now broken."

Dougherty did say the OEC was encouraged by a rare floor amendment in the House that prohibited oil and gas drilling in nature preserves, and a Senate committee amendment requiring public notice and public comment for every parcel nominated to the OGLC for leases.

"While we still believe that as long as state parks are part of that bill it is fatally flawed, we do applaud the adoption of that amendment," Dougherty said. "The folks who are shareholders of that parcel of land and actually use those parks will at least have a voice."

The Senate was also scheduled to discuss the state budget bill, HB 153, on Wednesday. That bill also contains language allowing oil and gas drilling on state-owned land, including through directional drilling and with a 50-foot setback for new wells from water sources.

Ohio law currently allows some oil and gas drilling in forests and wildlife areas owned by the ODNR. The department controls more than 590,000 acres in the state, which includes parks, forests and wildlife areas. Drilling rights are already owned on roughly 25,000 acres, most in state forests. Mineral rights were severed on another 70,000 acres when the ODNR took ownership.

"Today Ohio took a major step forward in laying out a road map to a plan to develop state-owned properties for the benefit of Ohio," Tom Stewart, executive vice president of the Ohio Oil and Gas Association, told NGI's Shale Daily on Wednesday. "Today Ohio did something to help itself instead of going back to the taxpayers and asking for even more money."

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