The Joint Legislative Air and Water Pollution Control and Conservation Committee this week has released its report “Oil and Gas Leasing Activities on Commonwealth-Owned Lands," pursuant to House Resolution 394 of 2003.

The resolution was adopted in response to a policy proposed by the Department of Conservation and Natural Resources in its draft final State Forest Resource Management Plan (SFRMP), unveiled in 2003, that would have terminated all future leasing of shallow natural gas reserves beneath Commonwealth-owned lands.

The report contains four recommendations regarding DCNR’s oil and gas leasing policy:

· DCNR should retain the proposed ban on new oil and gas well sites and roads in bioreserve areas, old growth areas and wild and natural areas, allow limited use along steep slopes and high recreation impact areas (including buffer zones appropriate to such areas), but continue to grant waivers in buffer areas where greater environmental benefits occur;

· DCNR should replace the proposed blanket ban policy with one that would accommodate natural gas exploration and production in all geological horizons beneath State Forest lands under controlled conditions established in the leases;

· DCNR should adopt a lease structure that provides economic viability for gas production while ensuring protection for the state’s forest reserves. Leases should reflect the Department of Environmental Protection’s rules and regulations as closely as possible and ensure confidentiality of proprietary information contained in the leases; and

· DCNR should adopt a modified bonus and fee structure reflecting nationwide industry norms, in order to facilitate broad-based participation in the lease bidding process.

“The recommendations will allow for DCNR to continue its practice of multiple resource management on the 2.1 million acres of State Forest land in Pennsylvania. The recommendations will allow for mineral operations on DCNR-owned land that are in accordance with sound conservation practices and which are fully compatible with other uses and values including timber, wildlife, forests, recreation and water resource management,” said Committee Chairman Rep. Scott E. Hutchinson (R-64)

“The recommendations also allow for an ecologically safe opportunity to capitalize on the clean energy provided by natural gas, and maintain the revenue,” [$3 million - $4 million annually] “provided by the Oil and Gas Fund which has helped to finance the creation of eight new State Parks, supplement and expand 31 others, and purchase forest land,” added Committee Executive Director Craig D. Brooks.

The report notes that DCNR and a Gas Industry Work Group have been meeting for the past two years to work on possible changes to DCNR’s standard oil and gas lease agreement to reduce operational and access problems on State Forest lands, and have agreed upon several recommended changes, which are supported by the committee.

The proposals include a new dispute resolution section, continuation of the existing royalty rate of 12.5 percent and resetting of the rental rate to $5 per acre per year with periodic reviews for appropriateness, establishment of certain drilling conditions and conditions for granting of waivers, and new language to ensure confidentiality of operators’ data while allowing free access as necessary to data by DCNR’s technical staff.

The proposed changes do not recommend a ceiling on the number of wells that would be allowed on State Forest land at any one time.

Pending legal reviews, the proposed changes to the standard agreement may be in place later this year, according to the report.

The Committee report also contains a history of oil and gas leasing in the Commonwealth, benefits to the Commonwealth from leasing and information on the SFRMP and its development.

Oil and Gas Leasing Activities on Commonwealth-Owned Lands is available online through the Joint Committee’s website.

2/10/2006