Pennsylvania Gov. Tom Corbett is hoping to generate $75 million in extra revenue and additional oil and gas royalties for the state’s general fund by lifting a more than three-year ban on drilling in state-owned forests and allowing exploration and development for the first time ever in state-owned parks.
The Republican pushed the idea earlier this week when he unveiled a $29.4 billion budget for 2014-2015, along with other new revenue streams aimed at filling a $1.2 billion deficit. About 700,000 acres of state forests are currently under lease, but in 2010 then Democratic Gov. Ed Rendell enacted a moratorium on the remaining 800,000 acres after lawmakers failed to pass an oil and gas severance tax (see Shale Daily, Oct. 27, 2010).
Shortly after being elected in 2010, Corbett promised to gradually lift that moratorium, and his latest nod to such a proposal stands in direct contrast with many of the seven democratic candidates vying in a primary to challenge him in the General Election in November. Those candidates have come out to back a new severance tax, and in some cases, combine it with the state’s existing impact fee, which charges a flat annual fee for unconventional wells drilled in the state (see Shale Daily, Jan. 28).
Corbett’s budget and his speech earlier this week to deliver his proposals was short on any major policy implications for the oil and gas industry (see Shale Daily, Feb. 4). He failed to mention the controversies surrounding a recent decision by the Pennsylvania Supreme Court that struck down parts of Act 13 and several proposals once again making their way through the General Assembly for a new severance tax (seeShale Daily, Dec. 20, 2013).
State lawmakers greeted the budget proposal with a largely mute response, and oil and gas industry groups have thus far stayed quiet about a proposal to lift the ban on drilling in state forests, even as they push for locally-owned public land acquisitions in some parts of the state (see Shale Daily, Dec. 12, 2013).
“The governor’s annual budget address is always a mere starting point, the first step down a long path of negotiation,” said State Rep. Will Tallman (R-York County). “Next week, the appropriations committee essentially begins the negotiating process during a series of hearings that will last three weeks.”
Meanwhile, conservationists have taken aim at a proposal to divert $117.5 million from the state’s Oil and Gas Lease Fund to replace general revenue monies for daily operational costs at the Pennsylvania Department of Conservation and Natural Resources.
“We are increasingly concerned that absent a healthy economy and responsible drilling tax on natural gas development, Gov. Corbett is making the general fund reliant on the rapid exploitation of resources that he should instead be conserving for this and future generations,” said Cindy Dunn, president of the statewide public interest group PennFuture.
Historically, funds from the lease fund were used for conservation efforts, but in recent years the state has taken to using them for operational purposes.
Corbett’s budget does dedicate $200 million to projects in the state’s parks and forests, but it remains unclear how the state could lift a moratorium on drilling in state forests after the Act 13 ruling weakened the Pennsylvania Department of Environmental Protection’s (DEP) ability to regulate by striking down zoning provisions in the law (see Shale Daily, Dec. 27, 2013).
As fiscal issues continue to confront the state, many contend that money from oil and gas production and development could help fill the gap, but the proposed fixes have mainly come in the form of a new severance tax. The upcoming gubernatorial election is expected to be a referendum on some of the state’s oil and gas policies to date. A poll released last week by Franklin & Marshall College showed just 23% of those surveyed feel Corbett deserves reelection.
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