Natural Gas Industry Proposes Rescue of Environmental and Parks Budgets

Expedited auction of state land leases for Marcellus Shale exploration could yield $200 million for New York State in fiscal year 2010-11.

LAKEVIEW, NY (04/15/2010)(readMedia)-- New York State could raise more than $200 million in fiscal year 2010-11 alone by expediting the auction of state land leases and the application approval process under a proposal being advanced by the Independent Oil & Gas Association of New York.

The industry recommends funds from the proposal be used to help restore cuts to the Department of Environmental Conservation's Environmental Protection Fund (EPF), and enable the Office of Parks, Recreation and Historic Preservation to open state parks and preserves this year. In addition, the funds raised could support additional staffing at several state agencies to oversee the review, approval and enforcement/oversight processes for Marcellus Shale applications and operations.

"New York is in a major fiscal crisis, including a budget deficit of more than $8 billion," said IOGA of NY Executive Director Brad Gill. "The oil and gas industry is offering to be part of the solution. Our industry wants to expand in New York and, unlike other industries and corporations, we are not looking for handouts from the state."

The governor and Legislature are nearing an agreement on the 2010-11 state budget, which will likely include significant budget reductions. The governor's spending proposal alone recommends the closure of 41 parks and 14 historic sites, and reducing the EPF by $69 million (from $212 million to $143 million). Complicating matters further, the National Parks Service has threatened to withhold millions of dollars in federal funding to New York is the state closes parks this year.

It would be the first time ever that New York parks would have to close, and the most significant proposed cuts to the EPF since its creation in 1993. The EPF is used to protect water and air quality, update sewage treatment facilities, support working farms, preserve historic heritage and revitalize waterfronts, monitor pesticide use, and more.

The DEC is poised to release a new environmental impact statement to regulate expanded natural gas exploration in the Marcellus Shale formation, which extends from New York's Western Catskills and Southern Tier into Pennsylvania and West Virginia. The Marcellus is America's largest natural gas deposit, and it carries the potential to greatly increase New York's energy independence, while vastly improving economic recovery and job creation.

IOGA's proposal is not unprecedented. In September 2008, the state sold land for oil and gas development and attracted an average bid of about $2,000 per acre from 18 energy companies for a total of 74,000 acres. A recent auction of natural gas lease rights on Pennsylvania's state land holdings raised $128.5 million – more than twice the amount anticipated. Sixteen energy companies bid an average of $4,020 an acre for access to six parcels totaling 32,000 acres.

IOGA estimates the state could receive at least $217 million in new revenue from the lease of less than 30 percent of leaseable land. Future proceeds from royalty payments could also be dedicated to fully fund the State Parks and EPF. IOGA's proposal also includes a recommendation to convene a committee of natural resources experts to identify potential sustainable locations.

The economic opportunities for New York are enormous. A report issued by the State Asset Maximization Commission in June 2009 determined that from 1999 to 2009, New York had collected $30.8 million in land, oil and gas leasing. Fully $16 million of this revenue was from energy industry bonus bids on DEC-managed lands in competitive lease sales held in 1999, 2003 and 2006, according to the SAM Commission.

New York State's leasing potential totals about 180,300 acres, with the possibility of receiving bids for its holdings at a range of $1,000 to $3,000 per acre. Possible leasing revenues could amount to between $180 and $540 million in future leasing revenues. The state also could collect revenue from royalty payments, the SAM Commission wrote.

"We are urging state lawmakers to appreciate the economic and environmental potential that a more robust natural gas exploration and extraction program would have on New York and its residents," Gill said. "They should not author or support any bills that stand in the way of progress."

IOGA of NY is a trade association founded in 1980 to protect, foster and advance the common interests of oil and gas producers, professionals and related industries in the State of New York. Visit IOGA on the web and sign a petition in support of natural gas exploration at iogany.org or marcellusfacts.com.

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