Pennsylvania raised $19 million from leases to drill beneath waterways

Pennsylvania raised $19 million from leases to drill beneath waterways

When Gov. Tom Wolf issued an executive order prohibiting the state from signing new leases for gas drilling beneath state parks and forests in January, he left a third category open for business: public lands managed by the state’s conservation agency.

The Department of Conservation and Natural Resources routinely leases publicly owned gas rights far beneath the beds of streams and rivers to companies drilling horizontally from well pads built on neighboring properties. The Wolf administration plans to let that continue.

“When a stream is outside a state forest or state park and runs through private property, gas leasing remains an option as long as applicable laws are followed,” said Jeffrey Sheridan, Mr. Wolf’s press secretary.

Since 2010, DCNR has signed 21 leases for natural gas drilling under 3,500 acres of publicly owned waterways, mostly in southwestern and north-central Pennsylvania. Twenty of those leases were signed in the last two years, including seven that were signed on Jan. 9.

The state has raised $19 million in bonus payments and royalties from the contracts.

More leases are in the pipeline. DCNR spokeswoman Christina Novak said six new leases are in an advanced stage of development and 13 are in early discussions.

Streambed leases are only a sliver, in terms of both acreage and revenue, compared to the state’s better-known state forest leasing program. DCNR leased nearly 140,000 acres of state forests for Marcellus Shale gas development and has collected more than $700 million through bonus payments and royalties on the leases since 2008.

Unlike state forest lease sales that were offered in order to raise money for the state budget, river leases have been seen as a way to collect money owed to the state from drilling that would have taken place anyway.

“The big question is, is the Commonwealth leaving money on the table,” said Mark Szybist, an attorney with the environmental group PennFuture. “It’s not that the environmental risks are any greater with these sorts of drilling operations. It’s primarily a financial issue.”

The state is presumed to own the river beds — and the depths of earth and minerals below them — between the ordinary low water marks of all navigable waters, a nuanced term that includes every waterway, from its headwaters to its mouth, that has ever been used or may be used as a highway for trade or travel.

DCNR published a list and map of waterways that are known to be publicly owned in 2012 and advised drilling companies that they have to sign leases and pay royalties to the state if they plan to draw gas from areas bisected by those ribbons of water.

The text of each DCNR streambed lease opens by establishing that the drilling company signing the contract has already leased land around the stream and that DCNR has determined that leasing the gas rights beneath the stretch of waterway is “in the best interests of the Commonwealth.”

DCNR was prompted to develop a standard river lease after it became clear that companies had already drilled horizontally beneath publicly owned waterways from well pads on nearby properties without paying the state for its portion of the gas. In other cases, the agency found that state-owned gas rights beneath streambeds were creating legal obstacles for companies trying to extract gas from private property bordering the waterways.

Most shale wells, with long laterals that often stretch a mile sideways through the rock, will drill under at least one body of water in the state, whether it is privately or publicly owned, Mr. Szybist said. “That’s just the nature of Pennsylvania. We’ve got 86,000 miles of streams in this state.”

Ms. Novak said the agency is reviewing well permit files and using other methods to track down instances where natural gas companies might have drilled beneath publicly owned waterways without leases, but DCNR does not know with certainty how many times that has happened.

“We want to make sure that where we should be compensated, we are compensated,” she said.

The state has succeeded in getting companies to sign belated leases for wells already drilled under rivers — at least some of DCNR’s 21 streambed leases were negotiated when companies learned about the department’s streambed policy and reported past wells, Ms. Novak said. Other leases were signed in the normal order before drilling began.

Publicly owned streambeds that have been leased in western Pennsylvania include sections of Ten Mile Creek and Dunkard Creek in Greene County, Connoquenessing Creek in Butler County, the Kiskiminetas River in Armstrong and Westmoreland counties, Black Lick Creek in Indiana County and the Shenango River in Lawrence and Mercer counties.

The largest streambed lease was the first modern one: Chesapeake Energy leased 1,500 acres beneath the Susquehanna River in Bradford County in 2010.

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