The Curious Case of DCNR's Streambed Leases

In 2012, we noted a new Department of Conservation and Natural Resources (DCNR) policy statement titled “Shale Gas Development Beneath Publicly Owned Streambeds” and posed this question: How many wells have been drilled beneath publicly-owned streambeds in Pennsylvania without a lease i.e., without permission from the DCNR or compensation for the public?

Yesterday, StateImpact Pennsylvania revealed that since 2012, the DCNR has entered into a total of nine streambed leases for gas well drilling beneath publicly owned streams. The article highlighted four leases executed in 2014 covering more than 1,400 acres of land under four prominent publicly-owned streams – the Susquehanna River, Black Lick Creek, Ten Mile Creek, and Dunkard Creek.

The StateImpact article also revealed that, after discovering around 2009 that some gas companies had illegally drilled under public streambeds without leases, DCNR entered into after-the-fact leases as a form of “enforcement action to collect money owed to the Commonwealth.” The article noted, however, that according to Governor Corbett's press secretary, “the state has not sought to get retroactive payments from the drillers,” apparently meaning that the Commonwealth has not sought to collect royalties for gas extracted before the after-the-fact leases were signed. The amount of foregone royalties is unclear.

Our research indicates that four of the other (reportedly five) streambed leases executed by DCNR since 2012 are as follows:

• A February 15, 2013 lease to Anadarko E&P Company, LP for 9.197 acres under the East Branch of Wallis Run in Lycoming County, just south of the Loyalsock State Forest; 

• A February 19, 2013 lease to Anadarko E&P Company, LP for 59.62 acres under Beech Creek in Clinton County;

• An April 13, 2013 lease to R.E. Development, LLC for 138 acres under Connoquenessing Creek in Butler County;

• A December 2, 2013 lease to EQT Production Company for 2.55 acres under Ten Mile Creek; 

We could not locate a fifth lease.

The news of these leases raises several questions.

First, is the $5.9 million in bonus money from the four new leases a part of the $75 million to be raised this year from non-surface DCNR leases under Governor Corbett’s proposed budget? Or is the $5.9 million in addition to that $75 million?  

Second, as far as we can tell, the DCNR has issued public notice in the Pennsylvania Bulletin for only one of the nine streambed leases executed since 2012 – the R.E. Development lease.  Why were the others not noticed?

Third, to repeat our question from 2012, how many wells have been drilled beneath the Commonwealth’s publicly owned streambeds without a lease – and how much revenue has the Commonwealth left on the table by not taking legal action against operators who have drilled such wells?

Questions aside, yesterday’s news highlights the continuing lack of transparency in the DCNR’s oil and gas leasing program and the fact that the DCNR’s regulations, which contain thirteen separate provisions regulating State Forest picnic areas, are completely silent on the question of oil and gas drilling on and under State Forests, State Parks, and publicly-owned streambeds.

Mark Szybist is a staff attorney for PennFuture and is based in Wilkes-Barre. He specializes in oil and gas law.