Pa. agency gets lion's share of funding from drilling industry

Posted: July 04, 2013

The agency that oversees the state's parks and forests has conservation in its name.

But its funding source has become much more about extraction - of natural gas.

The current budget, passed Sunday, shows that the Department of Conservation and Natural Resources no longer gets most of its money from the state general fund. It now gets the bulk of its operating revenue from a fund swollen by money from natural gas development.

The practice, started under Gov. Ed Rendell and escalated under Gov. Corbett, leaves the agency improperly beholden to the natural gas drilling industry, says State Rep. Greg Vitali (D., Delaware County).

"There's a concern when an agency whose mission is to conserve state lands is funded by the extraction of resources from state lands," said Vitali, minority chairman of the House Committee on Environmental Resources and Energy. "It's a conflict of interest."

The current budget shows a $30 million payment to the DCNR from the state's general fund, and more than three times that - $106.5 million - from the Oil and Gas Lease Fund, which consists of rents and royalties from drilling on state forestland.

Vitali called the figure "shocking." He voted against the budget because of it, he said.

He and others said the funding was not helping the agency, just getting state finances out of a bind.

"I'm not even sure this appropriation is entirely legal," he added. "My mind begs for an audit."

The way he reads the law, lease-fund money is to be used only for special projects and infrastructure improvements, not day-to-day operating expenses.

A spokeswoman for the department said the contributions were proper. "We say this is consistent with the goals that were established when the fund was created, which is conservation, recreation, and flood control," said Chris Novak.

The lease fund was created in 1955 by the now-legendary Maurice K. "Doc" Goddard, a forester who wanted to see a state park within 25 miles of every resident. He saw revenue from the fund as a way to achieve that.

Before drilling for natural gas came to the state's Marcellus Shale region, about $5 million a year went into the fund from oil and natural gas drilling, Novak said.

But in recent years - as leases on state land were sold and wells gradually were drilled and started producing - "we have seen the fund increasing exponentially," she said.

The money flowing to the DCNR from the lease fund has steadily risen, reaching $106.5 million in the year that started July 1.

Likewise, money from the state's general fund fell from $116.5 million in 2007-8 to $30 million this year.

"They're almost taking this whole agency off budget," Vitali said.

He said previous DCNR secretaries had noted about $1 billion worth of project backlogs, including replacing high-hazard dams, that he said the fund could be used to pay for.

Patrick Creighton, a spokesman for the Marcellus Shale Coalition, an industry group, called the current concerns a manufactured issue "solely for the sake of stirring controversy," adding that it "shows how dangerously out of touch" some can be.

The Pennsylvania Environmental Defense Foundation, a nonprofit formed in 1985, filed suit against the state in 2012, contending the practice of using money in the lease fund for general expenses instead of further land protection, improvement, or mitigation from natural gas development violated state law.

The suit was in response to Rendell's requiring state forestlands to be leased, and then using the money to fill a $60 million budget gap.

"Leasing state land for gas extraction, that's causing harm," said the group's attorney, John Childe. "Taking the money from that lease and using it for the general fund, rather than to protect and conserve the land that's being impacted . . . is unconstitutional."

The lawsuit is ongoing.

The influx to the lease fund took off in 2010, when natural gas drillers bid $128.5 million to develop 32,000 acres of state forests. The acting DCNR secretary, John Quigley, said he was worried the windfall might prompt policymakers to push for more leases.

"As we sit here this afternoon, fully one-third of the state forest is now leased for gas exploration," he said in an interview then. "I think that raises some important questions. How much is too much?"

Reached Monday, he declined to comment on the current issue.

Later, Rendell enacted a moratorium, which still stands, although the leases that were sold are being developed and generating more income. Corbett has the authority to lift the moratorium at any time, but Vitali has introduced legislation to permanently ban the leasing of state forestland for natural gas drilling.

Currently, 700,000 of the state's 2.2 million acres of state forest are available for leasing, Novak said. Nearly 900 wells have been permitted; 325 are producing gas - and providing royalties. That leaves more than 500 wells in the queue, potentially adding still more to the lease fund's coffers.


Contact Sandy Bauers

at 215-854-5147, sbauers@ phillynews.com, or follow on Twitter @sbauers. Read her blog, "GreenSpace," at www.inquirer.com/greenspace.

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