Gov. Corbett's Spending Plan Ties DCNR, DEP Budgets to Gas Drilling Revenues

Mar 5, 2013

Democratic State Senators have a few problems with Governor Tom Corbett's proposed budgets for the Department of Conservation and Natural Resources (DCNR) and the Department of Environmental Protection (DEP).

First of all, State Senator John Yudichak (D-Luzerne) said DCNR's budget is too dependent on royalties garnered from Marcellus Shale natural gas drilling in state forest land. While $53 million of the DCNR budget comes from the state's General Fund, roughly $77 million comes from royalty fees on gas extraction.

"I would be very careful about building that into a structural budget," said Yudichak. "We have to be careful about building what could be one-time dollars into the structural budget of DCNR to fund operations and administration."

Roughly half of the state forest area overtop the Marcellus Shale formation has been leased to gas companies; in 2010, then-Governor Ed Rendell imposed a moratorium on new leases for gas drilling in state forests, which is still in effect.

Senator Yudichak said he had the opportunity to question DCNR Secretary Richard Allan during budget hearings.

"One of the questions I pressed to the Secretary was whether or not recent negotiations with an oil and gas company to expand drilling on some of our state forest land would effectively end the 2010 moratorium on additional drilling in our state forest land," said Yudichak. "That question is still open-ended."

DEP Conservation Districts Could Be Funded By Impact Fee

The DEP's "conservation districts" would be funded by Pennsylvania's impact fee on shale gas drilling starting this year under the governor's budget.  State Senator Judy Schwank (D-Berks) said there are two reasons that the plan might short-change the districts.

"One, we can't be sure, of course, of what the Marcellus Shale income will be," said Schwank. "Furthermore, in counties like mine, where we do not have spud wells, it's likely we will see a reduction in the funding for conservation districts."

Schwank said the conservation districts, which fund various environmental programs in each county, should be paid for from the General Fund.

Senator Yudichak said Pennsylvania is now beginning to realize the difference between a severance tax on natural gas and an impact fee. While Pennsylvania enacted a relatively small impact fee last year, Yudichak said most other shale states have been reaping huge amounts of revenue through their severance taxes, such as North Dakota.

"North Dakota: $2 billion. By comparison, Pennsylvania generated just over $200 million through an impact fee, not a severance tax," said Yudichak. "I think that has seriously limited departments like DCNR from fulfilling their responsibilities, from tackling their enormous backlog in maintenance in any capacity."