The state’s Department of Conservation and Natural Resources DCNR) is looking to double the amount of money devoted to infrastructure projects from its oil and gas lease fund, describing the budget proposal as a unique opportunity to capitalize on a increased interest in outdoor recreation.
The $112 million allocation would come out of the lease fees collected from oil and gas companies that drill on public land – something that Republicans have been looking to expand since the state enacted a near-moratorium on new drilling leases over a decade ago.
During a budget hearing Tuesday, Senate Republicans indicated they intended to take up the issue as part of budget negotiations with Gov. Josh Shapiro, reasoning that a drilling expansion could be leveraged to help fund the DCNR’s infrastructure goals.
DCNR Secretary Cindy Adams Dunn, however, described the issue during Tuesday’s hearing as “an essential disagreement on the purpose of public land” and said Shapiro has said he “had no plans to change” the lease moratorium.
But some Republicans remained optimistic, particularly if – as Senate Appropriations Chair Scott Martin, R-Lancaster, suggested – money from new drilling leases is dedicated to environmental purposes, such as the state’s Clean Streams Fund and its obligations to the Chesapeake Bay cleanup program.
“It’s a new administration, you never know if there are new opportunities to look at that,” Martin said after Tuesday’s hearing.
The budget ask: Under Shapiro’s 2023-24 budget proposal, the allocation out of the state’s Oil and Gas Lease Fund into the DCNR’s infrastructure budget would be doubled, from $56 million in the current budget to $112 million.
The lease fund also pays for a portion of DCNR’s general operations, but is still currently taking in more cash than is being disbursed, with $167 million in lease payments expected to be received in the coming year. Shapiro’s proposed boost to the infrastructure line item would see the fund start to spend down some of its accumulated money.
The lease fund is separate from the fund which collects the impact fees levied on all gas wells, both publicly- and privately-sited.
What it would fund: The $112 million would go toward a number of items, Dunn and other DCNR officials told the Senate panel Tuesday. Dunn described “a lot of non-sexy infrastructure” such as thousands of miles of park roads, or sewer and water machinery.
All told, DCNR has approximately $1.4 billion worth of infrastructure needs. The largest lifts are likely the DCNR’s roughly 4,700 buildings – from visitors’ centers to outhouses – many of which are dilapidated, as well as the 139 dams in state parks.
The average DCNR dam is 66 years old, even though the life expectancy of a dam is generally around 50 years, according to DCNR Deputy Secretary for Parks and Forestry John Norbeck. While roughly $30 million of federal pandemic stimulus funds were previously put toward dam rehabilitation, there is more to be done, Norbeck said.
The push to make headway on the infrastructure backlog is brought on in part by the boom in state park use that occurred during the COVID-19 pandemic; DCNR sites saw over 45 million visits in 2020, a 22 percent jump over 2019, according to department counts.
“The interest in outdoor recreation has never been higher,” Dunn said. “We want to be able to serve, we want to be able to capture this moment.”
The moratorium: After the initial boom in Marcellus Shale formation gas drilling circa 2008-10, the DCNR of then-Gov. Ed Rendell put a moratorium on new drilling leases in state parkland and forests. Gov. Tom Corbett had planned to open leasing back up, but this did not cross the finish line before Gov. Tom Wolf came into office and re-committed to the moratorium.
(An exception to the moratorium has been certain leases for horizontal drilling under stream beds, which the DCNR has determined are governed separately as state waterways and are not part of the prohibition.)
This still leaves the DCNR with roughly a quarter-million acres of land leased for drilling, plus another 330,000 acres of land with severed rights – park and forest land where the DCNR has surface rights but where subsurface ownership is held separately and is open to gas exploration, according to Norbeck and Dunn.
Visitors to state parks might not know there are wells underneath them, since well lines are bored horizontally deep under the surface from a central apparatus on a well pad further away.
Proponents of expanded drilling have suggested that – even if the DCNR does not want any new above-ground disturbance from new well pads – it should still be willing to make new subsurface leases so that well pads on adjacent private lands can access the gas underneath DCNR lands, a point pressed repeatedly on Tuesday by Sens. Cris Dush, R-Jefferson, and Gene Yaw, R-Lycoming.
But the DCNR has cautioned that underground gas harvesting – typically done through hydraulic fracturing or “fracking” – is not without environmental risk and often invites apparatus such as pipelines or noisy compressor stations to be cited close to state parks, a detraction that simply does not comport with the DCNR’s mission.
“It does come down to the purpose of the original conservation of those areas,” Dunn said Tuesday.
Untapped potential?: GOP senators contend that if DCNR lands were to be opened up to new drilling, even without any surface disturbance, the resulting lease revenue could cover much of DCNR’s infrastructure needs.
“You have assets that could be used to fund every project that you’re talking about,” Yaw said, telling Dunn later in the hearing that “I look at it as like you’re sitting on a Mega Million-winning lottery ticket and you won’t cash it” with regard to the value of unleased gas fields.
The DCNR does not see this as a sure thing. Dunn noted during Tuesday’s hearing that over half of the existing leases, now over a decade old, are still undeveloped – bringing into question what the demand for new leases would be given that drillers have not exploited the majority of what they already have.
Despite high energy prices, major energy companies have indicated as recently as this past fall that they don’t foresee putting their cash flow back into capital. Natural gas production in Pennsylvania posted a record decline in the last quarter of 2022, according to the state’s Independent Fiscal Office.
The number of new well lines drilled, while up slightly over 2021, is still a fraction of what it was several years ago, according to IFO reports citing state Department of Environmental Protection data.
“The lottery ticket for us is the recreation economy,” Dunn said, particularly its ability to draw in new, younger residents to the commonwealth. “It’s bigger than gas, bigger than a lot of industries combined.”
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