Anatomy of a Rip-off, by Jan Jarrett, President and CEO, Citizens for Pennsylvania’s Future (PennFuture)
HARRISBURG, Pa.-(Business Wire)-September 11, 2009 - The following is an opinion editorial provided by Jan Jarrett, president and CEO, Citizens for Pennsylvania’s Future (PennFuture):
As part of the deal to break the budget impasse, huge multi-national energy corporations want immediate and full access to drill in our public forests and parks, instead of paying a severance tax on natural gas drilling. A severance tax would bring in revenue every year, and by 2014 could be generating half a billion dollars for Pennsylvania’s treasury, for environmental programs, and to compensate communities dealing with the damage from drilling.
Allowing drillers unfettered access to our state forests now, instead of assessing a fair severance tax would be a rip off for taxpayers. Now is not the time to allow wholesale leasing of our state forests when drillers could pick up leases at bargain basement prices.
Republicans and some Democrats in the General Assembly want to give the energy corporations’ virtually unfettered access to hundreds of thousands of acres of our forests – 130,000 acres a year for three years. The Republicans estimate that this will bring in $280 million a year in lease payments and royalties. This estimate is based on the guess that the energy corporations will pay an average of $3000 dollar per acre for the drilling rights and that all the available land would bring bids. This is what the industry is telling our elected officials, and our elected officials are falling for it like Internet newbies falling for a Nigerian email scam.
Here’s the real story. Last year the Department of Conservation and Natural Resources (DCNR) conducted an auction for leases on 74,000 acres of public land at a time when natural gas prices were at an all-time high -$14 per thousand cubic feet. The winning bids averaged $2300 per acre. Today, gas prices have fallen off a cliff and now are at about $2 per thousand cubic feet – a seven year low. Gas drillers are now paying an average of $250 to $500 an acre for leases on the open market.
And giant energy corporations are taking advantage of the new lower prices. Seneca Energy won the right to drill on 8400 acres of state land in last year’s auction and bid an average of $3700 for the lease – a total of more than $31,000,000. When gas prices started to fall, Seneca walked away from that bid, and DCNR offered the acreage to other bidders. ExxonMobil subsequently took over the lease for $9 million or just over $1000 per acre.
If DCNR is forced to hold lease auctions now, taxpayers lose. At the most optimistic estimate of $1000 per acre, a lease auction would bring in only $130 million this year and would probably net only half that amount. And drillers want access to land that is unsuitable for drilling – our natural and wild areas, state parks and other sensitive areas. DCNR already has 660,000 acres under lease for gas drilling. The Department estimates that at the maximum, there are an additional 250,000 acres suitable for drilling, but agency staff warn that at that scale of drilling, the other assets of the forest – for recreation, wildlife habitat, and logging - would be permanently compromised.
This is no way to balance Pennsylvania’s budget. Thoughtful legislators should vigorously oppose this deal solely on the grounds that it cheats Pennsylvania taxpayers out of reasonable payment for the exploitation of a public resource, and it’s a sweetheart giveaway to giant energy corporations.
People who care about Pennsylvania’s beautiful state lands should oppose it to ensure our parks and forests are available to our children and grandchildren for hiking, camping, hunting and fishing.
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