Indigenous Mineral Resources Development Act 147 of 2012 Highlights

INDIGENOUS MINERAL RESOURCES DEVELOPMENT ACT ACT 147 of 2012

ACT 147 HIGHLIGHTS Enables DGS to execute lease agreements for the mining or removal of valuable minerals, gas or oil owned by the Commonwealth. Allows DGS to cooperate and consult with, or delegate responsibilities to DCNR. If delegated to DCNR, DCNR may use authorities under Act 18 of 1995 Conservation and Natural Resources Act. Creates opportunities for state agencies and universities to generate much needed non-tax revenue to augment their budgets. Directs royalties to the state agencies and PASSHE schools operating properties Remaining revenues go to Oil and Gas Fund, PENNVEST and other PASSHE schools.

STATE-OWNED& STATE SYSTEM-OWNED LANDS Several hundred thousand acres of additional state-owned and State System property is now available for energy and mineral resource extraction. Primarily includes land associated with state hospitals, state correctional institutions, national guard armories, PSP barracks, PennDOT engineering facilities and county maintenance facilities as well as land controlled by PASSHE s 14 state-owned schools. Other than those lands of the Department of Conservation and Natural Resources, the PA Game Commission and the PA Fish and Boat Commission, the Commonwealth of Pennsylvania, in general, was prohibited from leasing or conveying subsurface rights or extracting oil, gas and mineral resources beneath state owned and State System lands prior to the passage of Act 147.

SUBSURFACE OWNERSHIP The Commonwealth typically acquires all property in fee simple. In the past unless specifically known at the time of acquisition and incorporated into the vesting deed, the Commonwealth assumed ownership of subsurface rights was included in the acquisition. Examples: Cresson SCI OGM rights reserved by Andrew Carnegie Ashland Museum of Anthracite Mining Reserve Carbon Corp. PennDOT Washington Co. Maintenance Facility Consol Energy Since 1981, the Commonwealth has expressly retained oil, gas and mineral rights for most properties sold by the Commonwealth whether ownership was known or not. Unknown ownership of OGM rights on most Commonwealth property and the costly title search process to determine who holds title has strongly influenced how DGS developed the OGM leasing process.

OGM PROCESS OVERVIEW DGS, DCNR and state agencies will each have a role. Piggyback off of existing DCNR processes and practices. Use same basic lease documents, terms and conditions and royalty structures. Determine whether Act 147 or Act 18 will be used.

DGS DGS will act as the central point of contact for nominations, coordinator for reviews and approvals between DCNR and state agencies/ PASSHE, and generally administer the OGM lease process for state-owned and State System land. Act 147 assigns administration of the program to DGS on behalf of the Commonwealth and its various agencies. DGS is legal titleholder for all Commonwealth-owned land and buildings and serves as real estate agency for most land acquisition and disposition as well as leasing of owned properties. Make initial assessment of viability of nomination and determine if the nomination includes all necessary information including clear ownership of subsurface rights by the Commonwealth. Determine whether Act 147 or Act 18 process will be used. Give final approval for all OGM leases prior to lease signatures.

DCNR DCNR will act as subject matter expert and, as needed, utilize authorities under Act 18 of 1995. Over a half-century worth of experience in effectively, efficiently and safely managing oil, gas and mineral leases within the Commonwealth s vast state forest system. Make evaluations based on viability, value and impact of proposed nominations. Lead negotiations on lease term and conditions, royalties, bonuses, etc. Collect and manage royalty payments and disburse to state agencies in accordance with Act 147.

STATE AGENCIES/ PASSHE State Agencies / PASSHE will make determination if energy/ mineral extraction adversely impacts surface operations. State agencies most likely to be involved in Act 147 leases are: DMVA DOC DPW PASSHE PennDOT PSP L&I DGS Concerns: Safety and security of inmates, patients, employees and facilities Drill site location(s) Traffic No or minimal impact to daily operations Ingress/ egress Transmissions right-of-ways

OGM PROCESS NOMINATIONS Operators may nominate lands at any time by submitting the requisite information to DGS. DGS will review documentation and consult with state agency using the nominated land to determine if there is a desire to lease. If documents are complete and using agency is supportive, documentation will be sent to DCNR for evaluation. Pending satisfactory review by DCNR and final approval by using agency and DGS, OGM lease will be authorized. This process generates an optimal listing of Commonwealth lands (tracts) desired by industry for lease.

NOMINATION DOCUMENTATION For a thorough and timely evaluation of the intended resource development, all OGM nominations must include : Plans with boundary lines showing Commonwealth property intended for resource development and any surface development/impact on the property Plans showing the potential lessee s existing property rights and wells on lands adjacent to the Commonwealth property (if applicable) A title report indicating that the Commonwealth is the fee owner of the OGM estate and as well as who has ownership of the surface estate An environmental impact study for any proposed surface development (only required for surface development on Commonwealth property) A list of any easements required through Commonwealth property An engineering estimate of potential yield Remediation plan

OGM PROCESS COMPETITIVE LEASE BIDS DCNR will conduct all lease solicitations. After a nominated parcel has been approved for lease, the tract(s) will be added to a list for future bid. DGS and DCNR will develop terms and conditions for the bid. DGS and DCNR will award and execute leases.

OGM PROCESS SOLE SOURCE LEASE/SALE DGS has the authority to waive competitive bidding where the Commonwealth owns a fractional interest. (Act 147) Reserved OGM rights from prior state land sales may be conveyed to the owner of the surface estate. (Act 147) The Commonwealth may enter into lease agreements with owners or lessees of property rights on adjacent tracts for the extraction of OGM resources if it is determined that competitive bidding is not practical or economically viable. (Act 18)

OGM PROCESS LEASE ADMINISTRATION Lease agreements for state-owned and state system lands will be jointly administered by DGS, DCNR and the using state agency. Generally speaking, DGS will manage the lease agreements and any legal disputes that might arise; monitor program activity and all general administrative matters. DCNR will receive, monitor and disburse royalty and bonus payments. State agencies will monitor site impact and report any problems to DGS.

NOMINATION INFORMATION & SUBMISSION DGS website: www.dgs.state.pa.us General OGM Information State Land & Building Inventory Follow link under See Real Estate Opportunities Contact information: Bureau of Real Estate: RA-GSGSBRE-OGM@pa.gov Real Estate Acquisition & Disposition: (717) 787-4394

ABBREVIATIONS DCNR Department of Conservation and Natural Resources DGS Department of General Services DMVA Department of Military and Veterans Affairs DOC Department of Corrections DPW Department of Public Welfare L&I Department of Labor & Industry OGM Oil, gas and mineral (rights) PennDOT Department of Transportation PENNVEST Pennsylvania Infrastructure Investment Authority PSP Pennsylvania State Police SCI State Correctional Institution PASSHE Pennsylvania State System of Higher Education Bloomsburg California Cheyney Clarion East Stroudsburg Mansfield Edinboro Indiana Kutztown Lock Haven Millersville Shippensburg Slippery Rock West Chester

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