Deep-well natural gas poses big risks

University Park, Pa. – Reminiscent of Pennsylvania’s halcyon
days of oil production and coal mining early in the last century,
the current boom in natural-gas well drilling poses a risk to the
state’s streams and groundwater, according to an expert in Penn
State’s College fiscally strapped agency – commission officials
tried to dampen gas-well revenue expectations.

Sounding at times both strident and defensive, Bill Capouilliez,
director of the commission’s bureau of wildlife habitat management,
repeatedly pointed out that the agency doesn’t own the mineral
rights below much of its 1.4 million acres of state game lands.

Commission sources said the morning session, which was attended
by about 40 people and has been televised several times already on
the PCN network, was intended to blunt calls for increased gas
revenues to preclude a hunting license fee increase, recently
proposed in a bill before the General Assembly.

“The Game Commission has been very good at maximizing our oil
and gas reserves to the benefit of sportsmen,” Capouilliez said.
“It’s not like we haven’t thought of this and somebody came up and
said, ‘Hey, why don’t you lease game lands for gas wells.'”

A lot of gas-well drilling is and will be occurring on game
lands, Capouilliez conceded, but a lot of it won’t benefit the Game
Commission. “We are just not as excited about drilling into the
Marcellus shale as some other people in that we are not going to
make billions and billions of dollars,” he said.

“You walk around on game lands and you see 2,610 wells and you
think the Game Commission is filthy rich, but we don’t get the
revenue from them.”

In some cases just the opposite. “We are inundated with requests
for information about our game lands and the Marcellus shale – and
they want it now,” said Capouilliez, who expressed frustration
about “the Marcellus shale experts” second-guessing the Game
Commission’s revenue projections and land management.

“It’s a drain on our resources – it’s not a value added,” he
said, adding that the commission is challenged by a lack of staff
to enforce environmental compliance on gas-well drillers on game
lands. “Already our land managers are spending significant amounts
of time on drilling issues.”

Environmental concerns are paramount when it comes to drilling
on game lands, Capouilliez explained. Wells are not permitted in
sensitive areas such as wetlands and valuable areas such as
important bird and important mammal areas.

Water quality and quantity issues complicate game land leasing
for gas wells, Capouilliez said. “Wildlife habitat and recreation
are primary uses of gamelands. Oil and gas leases are
secondary.”

Because the game lands were pieced together from many smaller
tracts given or sold to the commission over the years – and because
many of the previous landowners retained the mineral rights for
themselves before deeding the land over to the agency – estimating
natural-gas revenue from the holdings is difficult.

Capouilliez noted that research is ongoing to determine whether
the commission owns mineral rights on many tracts. “You might think
the Game Commission knows everything about all the game lands. But
it’s not that simple.”

Also, since many shallow natural gas wells have already been
drilled on game lands over the years, companies are converting the
shallow wells into deep wells tapping the Marcellus shale
formation, yielding no new leasing revenue to the commission.

According to Capouilliez, there are 2,610 oil and gas wells on
game lands, but just 340 of those are yielding revenue to the Game
Commission. Already 75,729 acres of the 1.4 million total game
lands acres are under lease to oil, gas and coal companies.

Former game commissioner Steve Mohr, of Lancaster – who is now
president of the Unified Sportsmen of Pennsylvania, the state’s
second-largest sportsmen’s group – attended the presentation. He
didn’t appear to buy Capouilliez’s pessimism about natural-gas
revenues.

“Isn’t there a good side ” Mohr asked Capouilliez, noting that
private industry is very optimistic about the huge economic
potential of extracting gas from the Marcellus shale layer.

“You can walk out of here saying the Game Commission is thinking
that it might get twice as much gas revenue in the next five years
– I think that is huge,” Capouilliez replied.

According to Capouilliez, last year, the commission recognized
$1.9 million in natural-gas revenue. The agency is estimating it
may realize up to $3.5 million in 2010.

“But even best case with gas, it won’t even make up for our lost
timber revenue,” he said. “The value of oak is down 50 percent;
cherry is down more than 30 percent.” According to Capouilliez,
commission timber revenues in 2010 are expected to be $8.5 million,
down from $15.1 million in 2007.

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