Stalled development of natural gas leases on Pennsylvania state forests is mimicking the natural gas industry’s broader downturn in the commonwealth.
There are currently no natural gas rigs operating in state forests, either on state leases or on private leases that underlie state forest tracts, Department of Conservation and Natural Resources Secretary Cindy Dunn said Wednesday during budget hearings in Harrisburg.
A year-old moratorium signed by Gov. Tom Wolf prohibits Pennsylvania from entering into new state forest gas leases, but Ms. Dunn said she doubts operators would want to sign new leases even if they could.
“On the existing leases we have, we are seeing no activity,” she said. “There is still a lot of buildout on existing leases that the companies have available and they are just not doing it.”
In 2015, about 40,000 acres were released from 15 state forest gas lease contracts, mostly because they expired without an operator drilling a first well within the lease’s five-year primary term, DCNR reported in January.
Sen. Gene Yaw, R-Lycoming, questioned how the DCNR secretary could be so certain that companies have no interest in new leases since the department has not recently offered forest land for lease.
DCNR has successfully leased gas development rights beneath state-owned waterways during the last year, including a lease for 72 acres beneath the Allegheny River in Armstrong County that the department signed with Kittanning-based Snyder Brothers Inc. for $287,200 in mid-January.
Ms. Dunn said those leases differ from past proposals to allow drilling under state forests from nearby private lands because the riverbed leases help to limit land disturbance: they save companies with property on both sides of the river from having to build extra wells and well pads just to avoid the narrow strip of waterway between them.
State forest leases, on the other hand, would invite development right next to preserved state lands, she said.
Mr. Wolf is proposing to shift the conservation agency off of its reliance on oil and gas revenue to pay for its operations, especially as low gas prices shrink the state’s gas royalty payments. Ms. Dunn said increasing the agency’s allocation from the state’s general budget fund will reduce the insecurity of relying on a fluctuating energy market.
Republican lawmakers said the repercussions that declining state forest royalty revenues are having on the budget should be a cautionary lesson as the governor proposes another fossil fuel-dependent revenue source in a shale gas severance tax.
“We are looking at reduced revenue into our operations because of the retraction of the oil and gas industry and, at the same time, looking to reestablish a new cost structure on that industry” through a severance tax, Appropriations Committee Chairman Sen. Pat Browne, R-Lehigh, said. “We have to be really careful of how we’re going to advance an additional cost on that industry.”
Laura Legere: email@example.com.