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New Bill Would Ensure the State Is Compensated Fairly for Leased Land

Senate committee takes up legislation that would help make sure the private sector pays fair market value when leasing public land.

Two years ago, the state purchased a piece of property to preserve as open space at the price of $49,000 an acre. A year later it allowed a pipeline company to lease the land, part of some upland forest in the New Jersey Highlands, for less than $1,100 an acre to expand a pipeline.

The transaction is illustrative of deals involving the state Department of Environmental Protection (DEP), which have long rankled lawmakers, environmentalists and state auditors. In fact, an audit by the Office of Legislative Services (OLS) found that half of the leases negotiated by the DEP could not be validated for fair market value.

Seeking to ensure the state is properly compensated for public lands it leases to the private sector, the Senate Environment and Energy Committee yesterday began debating a bill (S-2467) to require the value of a land in conveyance with the private sector to be determined by the financial return of the intended use or the "revenue generation potential" of the land.

In the Pipeline

The bill was drafted in response to a land conveyance endorsed earlier this year by the Statehouse Commission involving a pipeline expansion proposed by the Tennessee Gas Pipeline Co. Despite protests from conservationists, the commission approved a slightly revamped lease allowing the pipeline company to build a 23-mile natural gas pipeline through two state parks and a wildlife management area in the heart of the Highlands, the source of drinking water for 5 million people.

Two state senators, who are were part of the commission, sponsored the bill taken up yesterday. One of them, Sen. Bob Smith (D-Middlesex), the chairman of the committee, said at the outset the state is potentially losing tens of millions of dollars, if not more, by not looking at future uses of conveyed land. "The question is whether the state is being fairly compensated," said Smith, who voted against the pipeline deal.

Smith held the bill at the request of the DEP, which has created its own panel to overhaul the leasing of public lands. David Glass, deputy chief of staff for the agency, said the report is expected to be completed within three months, if not sooner.

“It’s on our radar and it is something we are actively working on,’’ Glass told the committee.

Smith said he would hold the bill until the committee’s March 10th meeting, but urged the DEP to come forward with any recommendations it has for changing the leasing process by then.

Others, however, urged the committee to move forward. "In all deference to the DEP, it has been part of the problem for a long time," said Jeff Tittel, executive director of the Sierra Club of New Jersey. "I wouldn’t wait for their report," he said.

Beyond not fairly compensating the state, the fact that the state does not charge companies more to lease public land leads the private sector to target public lands instead of seeking rights-of-way through private property, Tittel said.

"These lands were purchased by the public, for the public. The current system is broken and violates the public trust," Tittel added. "This bill will improve the system and go a long way to restore the public trust and protect our critical open space."

Sen. Jennifer Beck (R-Monmouth) expressed some reservations about the bill, saying if the state’s negotiations turned out to be too cost-prohibitive, it might lead some pipeline companies and utilities to defer undertaking needed projects.

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