Royalties affecting Conservation

On February 24, 2016, the Department of Conservation and Natural Resources (DCNR) Secretary Cindy Dunn testified during budget hearings.  She said that there are currently no natural gas rigs operating in state forests.  There is a moratorium from Governor Tom Wolf that prohibits Pennsylvania from entering into any new state forest leases, but Ms. Dunn testified that she doubts the industry would have any interest in the leasing the land at this time anyway.  DCNR has leased mineral rights for state-owned waterways.  The rationale for leasing beneath waterways is that riverbed leases lessen land disturbance, according to Ms. Dunn.

Ms. Dunn also testified regarding Governor Wolf’s proposed shift in DCNR funding from the Oil and Gas lease fund to a structure of more allocation from the state’s general budget.  Ms. Dunn testified that the shift in funding will reduce the reliance on the constantly fluctuating natural gas market. 

Governor Wolf’s budget proposal includes spending an additional $61.3 million from the state’s general budget fund on the DCNR to offset the $51 million reduction the agency is facing from the decrease in oil and gas royalties.  Royalty revenues were down in the first six months of the current fiscal year from $68.3 million to $36.7 million.  The budget proposal calls for an increase in landfill tipping fees for municipal waste to replenish the Oil and Gas lease fund.  The landfill fee increase is projected to raise $35 million.  It is anticipated that the fund will bounce back when the price of natural gas rises.  

Written by - Stephen Kenney

Research Assistant

Center for Agricultural and Shale Law