Natural gas drilling in state forests will generate about $80 million in royalties this year, according to an estimate by the state Department of Conservation and Natural Resources. That’s up about $8 million over the previous year.
The money will be helpful as Pennsylvania grapples with a potential shortfall of nearly $3 billion, says DCNR Secretary, Cindy Dunn.
“It’s a tight budget time. It’s a scary time for state agencies,” she says. “But we are a revenue-producing agency.”
Royalties from oil and gas drilling in forests go into Pennsylvania’s Oil and Gas Lease Fund. In recent years, DCNR– which manages state forests– has relied heavily on the fund to support its general operating expenses. There are currently 616 wells generating royalty revenue on state forest land– representing a little more than half of the 1,074 wells that have been permitted.
Revenue from the Oil and Gas Lease Fund, which includes rents, royalties, and other payments peaked in the 2013-2014 fiscal year at $148 million. The department’s reliance on the fund has introduced a level of volatility its budget, as the state’s drilling boom has expanded and contracted.
In Governor Tom Wolf’s proposed spending plan this year, about a third of DCNR’s budget will come from the Oil and Gas Lease Fund. Wolf also proposes eliminating 64 positions at the department. Dunn says the cuts will be made through retirements and vacant positions.
“Like all the agencies, we’ve been asked to find significant efficiencies,” says Dunn. “The task from the governor is, ‘Don’t harm the public service.’ The good news is the governor’s budget keeps DCNR whole. We’ve seen across the country when states hit a tough budget time, they close their state parks and they devastate their natural resources.”
Shortly after taking office in 2015, Wolf implemented a moratorium on new oil and gas leasing in state forests. Environmental groups and former state officials had accused Harrisburg lawmakers of selling-out forests for short term revenues. About half of Pennsylvania’s 2.2 million acres of public forest land is available for oil and gas development, either because it’s already been leased or because the state doesn’t own the mineral rights.