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Trying to Set a Fair Price for Private Use of Public Lands

Conservationists dismiss DEP's flat fee as far too low.

The Christie administration and lawmakers still appear to be at odds on how to reform the leasing of private rights-of-way on state-owned land, an issue that has emerged as contentious as a spate of energy infrastructure projects aims to crisscross environmentally sensitive areas.

Department of Environmental Protection executives touted an interagency task force report to legislators as making big strides in dealing with the problem. The issue arose as the result of a much-criticized deal in 2010 involving the leasing of a natural gas pipeline through two state parks and a wildlife management area in the heart of the New Jersey Highlands.

While saying that the proposed leasing reforms recommended by an interagency task force are an improvement on the current system, state Sen. Bob Smith (D-Middlesex) suggested the changes “may not go far enough.”

To that end, Smith steered a bill (S-826) through the Senate Environment and Energy Committee, which he chairs, that would require a valuation of how much revenue a project would generate when completed, a process proponents argued would deliver more value to taxpayers who paid for preservation of the land.

The issue also is expected to come up at the next meeting of the Statehouse Commission in March. It was the commission’s approval of a $45,000 lease with the Tennessee Gas Pipeline nearly two years ago that led to Smith and state Sen. Gerald Cardinale (R-Bergen) drafting a similar bill in the recently concluded legislative session. (It failed to make the floor in either the Senate or the Assembly.) The lease later was amended to return $180,000 to the state over 24 years, as well as require the pipeline company to pay $2 million in mitigation costs.

“It seems to me that taxpayers are not being well-served,” Smith said.

The DEP has long been criticized for the way it handles leases on public lands, including by the nonpartisan Office of Legislative Services, which has released three separate audits faulting the agency. The most recent noted that nearly half of the 236 leases under the DEP’s purview had expired.

In the 21-page interagency report, the flaws in the current system were acknowledged up front. “In some cases, agency fee schedules are terribly outdated; in other cases, current rules and statues prevent the state from realizing fair compensation for the private use of our precious state land, much of it preserved as unique open space, wildlife habitat, or recreational use,” the report said.

The issue has emerged as a controversial one given the extent of proposed expansions of natural gas pipelines and high-voltage transmission lines, most of which crisscross open spaces in the New Jersey Highlands.

The interagency report made specific recommendations depending on the lease type, whether it be for tidal lands, upland and linear corridors (such as the Highlands), and telecommunications and broadcast towers, among others.

“The process was broken,” said Ray Cantor, chief advisor to DEP Commissioner Bob Martin. “We think we’ve come a long way in solving the problem.”

The chief recommendation made by the report deals with establishing a 15 cents per square foot per year lease rate for private sector projects and a 5 cents per square foot for public projects in upland corridor or linear projects.

If that standard had been in place when the Tennessee Gas Pipeline project had been approved, the lease value would have been $7.5 million, according to Cantor.

The state came up with the 15 cents per square foot flat-lease-fee by looking at what other states do under similar circumstances, added Ben Witherell, director of Economic Analysis for the DEP. Those lease fees ranged from 4 cents per square foot to 30 cents per square foot, he said.

Environmentalists questioned whether the state would still be undervaluing land if the proposed 15 cents per square foot is adopted by the administration.

Bill Wolfe, executive director of Public Employees for Environmental Responsibility, suggested a much higher benchmark of $1.25 per square foot for leasing of open lands. He noted that two utilities trying to expand a high-voltage power line through the Delaware Water National Recreation Area recently offered to spend $30 million to buy up open space around that project. Under his calculations, Wolfe said that comes out to about $13 per square foot.

Jeff Tittel, director of the New Jersey Chapter of the Sierra Club, argued that as long as the state continues to undervalue preserved open spaces, they will continue to be targeted by developers to site their expansion projects.

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