Oil & Gas Lease Fund

Fact Sheet

Governor’s Budget Sheet

Governor Corbett’s proposed 2012-13 state budget continued the practice begun under Governor Rendell of funding DCNR’s general operations through Oil and Gas Lease Fund revenues rather than through the state’s general fund.

Historically, the Oil and Gas Lease Fund revenue had been dedicated for improving state park and forest infrastructure and acquiring lands important to the integrity and quality of the state parks and forests. Act 50 of 2009 provides $50 million for an annual appropriation from the Oil and Gas Lease Fund to DCNR. Governor Corbett’s budget will mean an additional $19.5M of the Oil and Gas Lease Fund to be allocated for state parks operations. The budget proposal does not indicate a transfer of excess funds going to the state’s general fund.

Background

In January 1955, Maurice K. Goddard became the Secretary of the Department of Forests and Waters. Twelve months later, Governor Leader signed the Oil and Gas Lease Fund Act. This act authorized expenditure of funds received from the leasing of oil and gas on state lands (not including Game Lands) to be used for a broad range of conservation infrastructure including land acquisition. The new fund provided Dr Goddard with the means to put in place what he later regarded as his single greatest achievement…locating a state park within 25 miles of every Pennsylvanian. The concept of the new fund was quite simple—revenues from the sale of publicly owned, non-renewable natural resources would be reinvested into conservation infrastructure that would provide long term public value. This concept was later mirrored in the late 60’s with the passage of the Federal Land and Water Conservation Act.

For over 50 years, the Oil and Gas Fund revenues have been dedicated to implementing this concept. From time to time there was some tension in the use of these revenues, but more the most part, the bulk of the funding has supported infrastructure and land acquisition investments for our State Park and State Forests.

In 1991, then Treasurer Catherine Baker Knoll questioned the Department’s authority regarding the appropriateness of various expenditures from the fund including operational related costs. This resulted in a more restrictive use to generally exclude operational expenditures. This interpretation was in accordance with the opinions of the then Attorney General, the Governor’s Office of General Counsel, and DER’s Office of Chief Counsel. Since that time, staff costs supported by the fund were generally associated with attorney time related to the actual lease development and some staff time within the Bureau of Forestry, who were managing the lease program. If money from the fund is transferred legislatively to the General Fund, the Governor is not bound by the restrictions on the use of the money within the Fund itself. However, it is likely that any money remaining in the fund will be subject to future creative legal opinions from the Governor’s Office or from within the Department designed to promote the use of the Fund to support future operational needs.

In 2012, Act 13 was passed, instituting that a percentage of the Oil and Gas Lease Fund be allocated to the Environmental Stewardship Fund each year. According to initial analysis, the Environmental Stewardship Fund would receive $20M from the Oil and Gas Lease Fund in 2013 and $35M in 2014 and beyond — assuming there is sufficient money in the fund after DCNR gets its allocation, which is determined in the annual budget and fiscal code process. It appears that this will require annual vigilance to ensure that the funding intent is honored.

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