Bureau of Forestry

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Department of Conservation Natural Resources
Bureau of Forestry
Oil Gas Program Dr. James R. Grace Deputy
Secretary for Parks Forestry April 1,
2008
Senate Environmental Resources and Energy
Committee
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DCNR Legal Mandates

• Conservation and Natural Resources Act 1995
• 302(a)(6) Authorizes DCNR to make and execute
  leases for mining or removal of valuable material
  from State Forests.
• 302(b)(10) Empowers DCNR to lease State Forest
  for underground storage of natural gas
• Act 1955-256 Established Oil and Gas Fund.
  Royalties and rents to be used by DCNR for
  conservation, recreation, and flood control

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Bureau of Forestry Mission
The mission of the Bureau of Forestry is to
ensure the long-term health, viability and
productivity of the Commonwealth's forests and to
conserve native wild plants.
The Bureau will accomplish this mission by

• Managing State Forests under sound ecosystem
  management, to retain their wild character and
  maintain biological diversity while providing
  pure water, opportunities for low density
  recreation, habitats for forest plants and
  animals, sustained yields of quality timber, and
  environmentally sound utilization of mineral
  resources.

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Oil Gas Program

• Major DCNR program for past 60 years
• 1,437 drilled wells
• 153 million in DCNR revenue

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Management Guidance

• Legal Mandates
• Strategic Plan
• SFRMP
• Forest Certification
• Advisory Committees
• CNRAC
• EMAC
• STAC
• RAC

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Managing Impacts, Balancing Tradeoffs
Oil Gas Program

• Consistent with Ecosystem Management principles
• FSC Certification standards
• Compatibility with other uses

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Managing Impacts, Balancing Tradeoffs
Oil Gas Program

• Aesthetics and recreational impacts
• Wild and Natural Areas excluded
• Forest fragmentation, water quality, plant and
  animal habitats of concern
• Environmental Review
• Comprehensive lease, provides optimal control

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Oil and Gas Program
Early milestones

• 1947 First Oil and Gas lease sale
• 1955 Oil and Gas Lease Fund established
• 1956 First Gas Storage lease issued

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Oil and Gas Program
Recent activity

• 1982 Largest lease offering (450,000 acres)
• 1996 shallow lease offering (8,500 acres)
• 2002 Trenton Black River deep drilling lease
  (51,000 acres)

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Gas Wells Drilled on State Forest Land Through a
Commonwealth Lease Agreement 1947-2007
1,437 wells in 60 years
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Oil and Gas Fund Annual Income 1947-2007
TOTAL OIL GAS LEASE FUND INCOME 153,659,000
INFLATION ADJUSTED VALUE 309,687,000
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DCNR Oil Gas Fund

• Since 1955, has provided 153 million for
  conservation, recreation and flood control
  projects
• Land acquired for state parks and forests
• Used to purchase 26 State Parks
• Oil and gas development rights under state parks
  and forests
• Pine Creek trail development
• Heritage projects and botanical surveys
• Vehicles, computers, equipment

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Oil and Gas Program

• The current picture

• DCNR owns 85 fee simple, controls surface and
  subsurface
• Currently 99 active leases on 270,609 acres
• 69,983 acres in gas storage leases
• 650 royalty producing gas wells
• 4.4 million in revenue in 2007

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Recent Policy Development

• 2002 Trenton-Black River (500,000 acres)
• Met with public opposition
• DCNR provided testimony to Legislature
• Public outreach
• Revised lease (218,000 acres)
• Strengthened environmental controls
• Successful lease sale of 51,000 acres
• Shallow vs. Deep

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Deep and shallow gas drilling

• Key part of the discussion
• Deeper the wells, the greater the well spacing,
  less surface disturbance
• Deeper wells produce higher volumes of gas

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Medium to deep gas drilling

• 320- to 640-acre well spacing

One Square Mile (640 acres)
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Shallow gas drilling
40-acre well spacing
One Square Mile (640 acres)
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2003 State Forest Resource Management Plan
Proposal

• Discontinue new shallow gas leases
• Focus on deep gas drilling, less surface impact
• Many resisted this proposal, concerns about
  rising energy prices

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2003 State Forest Resource Management Plan
Proposal

• General Assembly passed H.R. 394
• Joint Conservation Committee tasked to study
  DCNRs oil and gas leasing program.
• Urged DCNR to postpone adoption of a final policy
  regarding future shallow natural gas leasing
  until it received the committees report

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2003 State Forest Resource Management Plan
Proposal

• DCNR established Energy Sub-Committee within EMAC
  to evaluate shallow gas compatibility
• DCNR met with a variety of stakeholders to
  develop a more acceptable policy

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Joint Conservation Committee 2006
Recommendations

• DCNR should retain the proposed ban on new oil
  and gas well sites and roads in bioreserve areas,
  old growth areas and wild and natural areas
• DCNR should adopt a policy that would accommodate
  natural gas exploration and production in all
  available geological horizons beneath State
  Forest lands under certain controlled
  circumstances.
• DCNR should adopt a lease structure that provides
  economic viability for gas production while
  ensuring protection of the states forest
  reserves.
• In an effort to facilitate broad-based
  participation in the lease bidding process, DCNR
  should adopt a modified bonus and fee structure
  that reflects nationwide industry norms.

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2007 State Forest Resource Management Plan Update
Statewide public meetings

• Proposed policy that allows limited shallow gas
  drilling on a case-by-case basis
• Revised lease
• Specific and restrictive well spacing across all
  drilling horizons to reduce surface disturbance
• Provisions for increased confidentiality and
  dispute resolution for operators
• Adopted a modified bonus and fee structure that
  reflects nationwide industry norms.

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2007 State Forest Resource Management Plan Update
Public input
Generally, environmental interests opposed and
industry interests supported. Broad range of
viewpoints in between
Conservation Natural Resources Advisory
Committee

• Recommended that DCNR allow new shallow gas well
  leasing on State Forest land because it believes
  environmental protection measures incorporated
  into the newly revised lease allow for sound
  forest management, while providing new,
  economically viable opportunities for the oil and
  gas industry

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Revised gas drilling policy

• Focus on deep and medium development to minimize
  surface disturbance
• Allow for limited shallow drilling if reservoirs
  encountered
• Additional shallow gas leases considered
  case-by-case
• DCNR retains discretion to determine areas
  available for development

Shallow gas drilling will continue on current
leases and on tracts where DCNR does not control
mineral rights
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2008 Lease Offering

• Marcellus Shale/TBR Trough
• Northcentral Pennsylvania

• 75,000 acres
• Medium and Deep Drilling

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Oil and Gas Program 2008

• Long-standing, successful program
• Input from a broad base of stakeholders
• More comprehensive lease
• Strengthened environmental controls
• Responsive to industrys business needs
• Responsive to energy demands

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Balancing our resource needs and values

• Providing an economic benefit
• Using a clean burning fuel
• Funding conservation and recreation projects
• Ensuring ecological integrity
• Continuing a long and environmentally sound
  history of natural gas development