The Pennsylvania Department of Conservation and Natural Resources (DCNR)—not to be confused with the Department of Environmental Protection (DEP)—has found a new and novel way of extracting money from natural gas drillers in the state. If drillers have horizontally drilled underneath a public stream or river, the DCNR is going to ask those drillers to pony up with lease and royalty payments to the DCNR’s coffers. This one is going to be a lawyer’s delight.
Natural gas drillers have to sign leases and compensate the state if they plan to collect gas trapped deep beneath publicly owned streams and rivers, according to a policy developed recently by the Department of Conservation and Natural Resources.
The policy applies to gas gathered from pads on neighboring properties – away from the streams and their banks – where wells are drilled vertically before turning and boring laterally underground.
Waterways in the commonwealth are considered publicly owned if they are, or have ever been, used for commercial trade or travel. The list and maps of the waterways compiled by DCNR include hundreds of streams throughout the Marcellus Shale region of the state.
Where the state owns the streambeds, it also owns the mineral rights beneath them.
DCNR spokeswoman Christina Novak said the state is developing a standard agreement for companies that either want to drill horizontally under streams or that will, through hydraulic fracturing, draw gas from rock formations deep under the waterways. Unlike agreements for drillers who operate in state forests, the leases will not address surface impacts because there won’t be any on state property, she said.
"This would just allow an operator to access underneath a navigable waterway from nearby but to compensate the commonwealth because it is the owner of the resource," she said.*
The DCNR is actually looking at collecting money retroactively from drillers who have already drilled under so-called public waterways. They already got money from Chesapeake in 2010:
The state signed a $6.15 million lease plus 20 percent royalty with Chesapeake Energy in 2010 for a seven-mile stretch underneath the Susquehanna River in Bradford County. It holds one other agreement, from 2000, for gas under a navigable waterway.*
Part of the new policy is that if the waterway was “navigable” and had public traffic on it as far back as the 1700s, that’s considered a public waterway.
MDN has no idea is this is the case, but imagine this: You’re a farmer who owns a couple of hundred acres, and a big stream runs through it. You’ve leased your land on both sides of the stream, and the lease includes all of the acreage, including the stream. The driller is due to start drilling in the next few months. Some 150 years ago there used to be barge traffic up and down that stream as yesterday’s rivers and streams are today’s modern equivalent of roads and interstate highways. So PA considers it a “public” waterway because of the traffic on it generations ago. Is your lease now null and void? Does it need re-writing? Will the DCNR come after you (the landowner) for a portion of the lease payment because it’s already sitting in your bank account? Who knows??
If these so-called public waterways the state “owns” are not part of existing leases, then MDN says have it and extract your pound of flesh from the drillers. But if those waterways are already part of existing leases…that’s a legal nightmare and smacks of changing the rules after the game has begun.
Below is a map of public streambeds from the DCNR online interactive map for Bradford County, PA, where there’s perhaps as much or more drilling than any county in PA. You can see the scope of this issue.
To have a look at the public streambeds for any PA county, visit this site:
*The Scranton Times Tribune (Jun 4, 2012) – DCNR to collect money from drillers who harvest gas under public streams