More "Fleasing" of Public Wealth
by Ralph Kisberg, RDA Working Group
When it comes to gas development in our State Forests, bad decisions made by the Rendell administration continue to reverberate today, this time with Governor Corbett's plan to end the current DCNR moratorium and lease out more State Forest, and possibly some State Park land for so-called non-surface disturbance leasing.
A few details of the Governor's proposal were revealed at the DCNR's Natural Gas Advisory Committee meeting in State College on April 16th. DCNR Assistant Secretary Dan Devlin explained to the committee and those of us in attendance, that Corbett's proposed figure of $75 million dollars, expected to be generated to help this year's budget deficit via more state forest leasing, is based on feedback from well operators. Devlin explained that the tracts to be made available will be "nominated" by well operators, not chosen by the DCNR.
Some of the non-industry members of the committee were able to wring out more detail. Katy Dunlap of Trout Unlimited asked if the Bureau of Forestry will do evaluations of proposed acreage prior to the nominations. Devlin answered, "After they are proposed."
Ephraim Zimmerman of the Western PA Conservancy asked if DCNR is considering changes to its existing leases in connection with the new development. Devlin replied there will not be new infrastructure. The operators will use existing roads and pads to access the newly nominated tracts. This prompted the representative of Pennsylvania General Energy to begin whining about that restriction. PGE is the operator currently working in the Tiadaghton State Forest as well as adjacent State Game Lands 75 in western Lycoming County. If you want to see what a lovely job PGE and its financial partner Exxon, are doing in your state forest, head up Truman Run Road in far western Lycoming County and take a look for yourself (Warning: prepare to be disgusted.)
PGE's corporate person threatened that if the leasing does not allow for changes to existing infrastructure, "You may not get my bids" and "It may void the (original) lease." Another industry person explained that existing pads might need to expand or be adjusted in order to use them to reach adjacent new leases. The typical lease gave them a fixed maximum number of pads, but most ended up using less than originally planned. Could they now ask for more? Answer: Case by case basis.
It was obvious to those in attendance that DCNR, or perhaps more likely the Governor's Energy Executive, Patrick Henderson, also in attendance, had not thought the plan through thoroughly.
More questions were asked. Katy Dunlap: What is considered surface disturbance? Is it walking in the woods? Reply: "Moving soil."
PGE chimed in again: All we can give you is a notion of a development plan based on what we know. If there is no flexibility with adjacent lands, it may be an abrogation of the lease.
PSU Pedology (soils) Professor Patrick Drohan asked about pipelines on existing leases. PGE replied that their gathering lines are 24", with smaller lines from the pads to the larger gathering lines. PGE stated: "Operating abilities are severely restricted if we can only use existing infrastructure."
The Shell corporate person asked DCNR about their vision for the leasing process. How? Competitive bids? Sole sourcing? No formal lease sale, just wait for a nomination?
Shell and the other multi-national operators work in a world where most nations own their own mineral rights. Those countries operate far differently than Pennsylvania when it comes to their public mineral wealth. The usual practice is for countries to contract exclusively for seismic data; after the government chooses the areas for development, operators must buy the data from the government, not the seismic testing company. The notion of companies nominating publically owned land where they want to operate is hard to fathom, but here in good old gas-industry-sap, PA, there is precedent.
In 2010, following two years of leasing of expected high value public resources, or "sweet spot" areas, the Rendell administration invoked a section of the Act 18 legislation, the Conservation & Natural Resources Act, Section 301 (a) (13), which gives the DCNR the following power:
"To have the authority, with the approval of the Governor, to enter into agreements with owners or lessees of property or property rights located in the same area as lands owned or leased by the Commonwealth, for the protection, preservation or recovery of metallic or nonmetallic ore, fuel, oil, natural gas or any other mineral deposits underlying those lands, provided the deposits are owned by the Commonwealth."
The public rationale behind this screaming deal was explained in this May, 2010 article in the Philadelphia Inquirer by Andrew Maykuth.
In terms of the long-term management of our common wealth, it was a bad idea then. It is an even more galling idea now, in the middle of an election year, when the sitting Governor reaps millions of dollars in campaign donations from gas industry people or related people, corporate or human.
Why do Pennsylvanians put up with blatant favors of additional acreage made available to the gas industry in the current depressed land market? Why are our expectations so low for our fair share of a public asset that will be worth billions of dollars over time? Why again let the excuse of a budget problem (in a state that, unlike all other major producers, has no severance tax) allow for another bargain-basement current market price giveaway? Surely one day, when the market is not awash in gas and some of the long-term consequences of the development have emerged, the gas rights to these same public lands could be valued much differently by the real owners of the resource. Is it generationally fair to take that possibility away now, when so much was given up already?
The Democratic nominee for Governor has stepped up to say no more state land leasing now. Will the legislature? Will you?
