Budget Deal Announced Friday Will Lease 90,000 Acres Of State Forest Land For Drilling

Gov. Rendell and leaders from the Senate and House announced a budget deal late Friday that builds on the Legislative Budget Proposal announced on September 11 which included plans to lease about 90,000 acres of State Forest land to help raise $100 million to balance the state budget, according to a background document released this week.

Few details of the new budget agreement were released, however, the revised proposal cuts tax credit programs less than the original legislative agreement. Now $39 million will be cut from all tax credit programs, rather than $75 million.

It is not known yet what impact that will have on the Resource Enhancement and Protection (REAP) farm conservation tax credit, but the original Legislative Budget Proposal would cut the credit to $8.5 million from $10 million.

The Legislative Budget Proposal anticipated $100 million of additional revenue from leasing State Forest land for Marcellus Shale natural gas drilling for FY 2009-10. They estimate about 90,000 acres of forest land would have to be leased to yield that revenue bringing at about $1,100 per acre leased.

The proposal anticipates withdrawing $143 million from the DCNR Oil and Gas Fund to balance the budget in FY 09-10, and another $125 million in FY 10-11 (also proposed by Gov. Rendell). These diversions are in addition to the $174 million taken from the Oil and Gas Fund to balance the FY 08-09 budget.

The document points out Acting Department of Conservation and Natural Resources Secretary John Quigley has said the agency plans to lease 75,000-80,000 acres in FY 09-10.

In a specific response to concerns expressed about the leasing of State Forest lands, Sen.Mary Jo White (R-Venango), Majority Chair of the Senate Environmental Resources and Energy Committee, said DCNR can expect to keep about $9 million in additional revenue from closing on existing leases from Exxon bringing the available funding for the agency in the Oil and Gas Fund to $25 million, rather than the $16 million earlier estimated.

The three Caucuses are working on legislation that would guide Marcellus Shale oil and gas leasing to guide funds to the General Fund, DCNR and to local governments, but it is not clear whether it will be completed when the budget is adopted. It may come later with some other elements of the budget agreement.