Marcellus Shale Watch

The opening of bids for gas leases on 32,000 acres of Pennsylvania’s 2.1 million acres forest controlled by the Department of Conservation and Natural Resources exceeded the $2,000 per acre minimum bid by more than double, according to the Philadelphia Inquirer.  In addition to the primary payment of $128.5M, royalties will be set at 18.5%.  According to Secretary John Quigley, this brings to 692,000 the acreage of DCNR forest that is subject to gas leases.  The state does not own gas rights under all of its forest.  The excess paid over the minimum bid, $68.5M, will be placed in the Oil and Gas Fund and used for yet-to-be-determined conservation purposes.  An article in the Philadephia Inquirer can be viewed by clicking here.   The leases in this round contain some strict limitations on land disturbance from the gas exploration and production process.  The continued leasing of state forest for this purposes raises some interesting and important policy issues:  how to spend the proceeds of this leasing of this valuable and limited public asset, how to protect the varying longstanding surface purposes of the forest including public recreation and protection of the natural environment while using this important energy resource, how much to lease at this time or defer for a future time or generation, whether to purchase gas rights not owned by the state but which underlie state forest to prevent exploitation of the resource to the detriment of the public surface uses.  Managing gas leasing is not new to DCNR.  There are more than 700 gas wells in state forest now, and only three are Marcellus formation wells.  Good stewardship by the state will, one hopes, be also a model for private stewardship–both of the subsurface and surface resources.

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