A billion gallons of water and $278M in cash. Obscure Ohio watershed district hints at future of fracking state parks

© Jake Zuckerman/cleveland.com/TNS Tappan Lake, a 2,350 acre body of water, sits in the Muskingum Watershed Conservancy District. The MWCD entered a $40 million lease with Encino Energy, allowing drilling under the lake. It also sells water from the lake to power the fracking for gas underneath.

UHRICHSVILLE, Ohio – While a new state law just opened the door to fracking in state parks, agency reports show a little-known state body has leased out more than 31,000 acres of its land in oil and gas drilling deals under several pristine lakes and reservoirs in Southeast Ohio over the last decade.

© Jake Zuckerman/cleveland.com/TNS An Encino Energy well pad, as seen from the roadside in Scio, Ohio, a few miles from Tappan Lake. Encino entered a $40 million lease with the Muskingum Watershed Conservancy District to frack for gas under the lake.

The Muskingum Watershed Conservancy District (MWCD) earned a towering $278 million in leases and royalty payments between 2011 and 2022, selling rights to drill for fossil fuels under some of Ohio’s most beautiful attractions, like Tappan Lake. In that time, it has sold 1.2 billion gallons of water from surface level bodies to fuel the drilling thousands of feet below.

© Jake Zuckerman/cleveland.com/TNS Data provided by the MWCD, which did not sell water in 2018 or 2019. 2022 data is an estimate provided by executive director Craig Butler. MWCD officials emphasized the annual total amounts to about .25% of the watershed's total capacity.

For a sense of scale, the MWCD’s oil and gas leases span an acreage about the size of Cuyahoga Valley National Park.

“We’re making pretty heavy investments in conservation around the district, and a lot of that is money generated from oil and gas,” said Craig Butler, MWCD’s executive director.

Both supporters and critics of the MWCD’s leasing and lucrative relationship with gas companies agree it could serve as a model for the drillers’ next big target: Ohio’s state parks.

State lawmakers last year passed legislation effectively enabling plans to extract gas from beneath the parks. A ranking Republican recently suggested the windfall could backstop a billion-dollar income-tax cut that disproportionately favors wealthier earners. So far, though, neither the state government nor the oil and gas industry has offered an estimate of how much revenue the state stands to generate from opening state parks to drillers.

© Jake Zuckerman/cleveland.com/TNS Storage tanks used in the fracking process, seen from the roadside in Scio, Ohio, a few miles from Tappan Lake.

The MWCD received $218 million in signing bonuses alone on leases from 2011-2022. When including the 20% in gross royalties from gas produced, it has earned an average of $25 million per year in oil and gas revenue, according to data from its annual reports.

One year, 2014, yielded a whopping $110 million.

The money is enabled by hydraulic fracturing, commonly known as “fracking,” where gas companies drill thousands of feet underground before turning 90 degrees and drilling laterally for as much as a few miles. Operators then spray a high-power mixture of water, sand, and chemicals to free methane, commonly referred to as “natural gas.”

This would allow drillers to reach gas underneath state parks without necessarily interrupting the surface. While Gov. Mike DeWine has said he won’t allow surface interruptions on state lands, that isn’t guaranteed in law.

Fracking is a resource-intensive process. To meet demand, the MWCD sells hundreds of millions of gallons of water every year from bodies it controls to the gas companies. Even factoring in two years with no water sales, the district has sold an average of 114 million gallons of water per year since 2012. While a staggering sum in its own right, that amounts to an average of just about 0.25% of the watershed’s total water capacity, according to MWCD totals.

Virtually all of MWCD’s leases were entered into with out-of-state companies. Without factoring in royalties, they include:

· Gulfport Energy, which leased rights to 6,485 acres at Clendening Lake for $15.5 million

· Chesapeake Exploration, which leased rights to 3,682 acres at Leesville Lake for $21 million

· Antero Resources, which leased rights to 7,135 acres at Seneca Lake and 6,498 acres at Piedmont Lake for a total of $142 million

· Encino Energy, which leased rights to 7,300 acres at Tappan Lake for $40 million

A model for state parks?

Last week, Cleveland.com and The Plain Dealer reported how Encino Energy, a Houston-based driller with extensive operations in Ohio, is eyeing gas underneath Salt Fork State Park, a short drive from Tappan Lake.

In a statement, Encino lobbyist and spokesperson Jackie Stewart cited Encino’s activity at MWCD as evidence that fracking on state lands can be “done safely and without surface disturbance.”

The MWCD too touts that it blocks surface interruptions from fracking wells within its jurisdiction. However, a short drive around the Tappan Lake area reveals a landscape unmistakably changed by gas operations. Butler, a former Ohio EPA chief to Gov. John Kasich, emphasized the lack of surface disruption on its land but acknowledged a changed environment.

“There’s a lot of infrastructure. It’s not just the well pad, those are visible,” he said. “But there’s the pipeline that comes with it. And then there’s, occasionally you’ll see compression facilities and the like. There’s a lot of architecture infrastructure that it takes to not only drill it, but move the material where it needs to go.”

And the trucks, hauling freshwater or wastewater to and from drill sites, are a constant.

“Those things are everywhere,” said Ted Auch, a PhD in environmental science who runs Fractracker, a website that chronicles drilling operations, water use, pipelines, and other data points of the gas industry.

State lawmakers opened the door to fracking in state parks late last year via House Bill 507. The original bill focused on food safety related to poultry sales. However, in the dying moments of the two-year General Assembly, Senate Republicans tacked the state parks idea onto the poultry bill. They also added another amendment legally redefining natural gas as a “green energy” source, even though it’s a fossil fuel and greenhouse gas with climate-warming properties.

Butler, in a letter obtained by Cleveland.com and The Plain Dealer, wrote Sen. Tim Schaffer, a Senate Republican who played a key role attaching the amendments, in support of the state parks idea. The MWCD, he said, has “proven that public lands can be safely and properly developed for oil and gas” and can be a model for other state lands. The money funds district programs and, he said, can benefit landowners who live near state parks who could play host to well pads or other key infrastructure.

“Furthermore, responsible state lands leasing supports oil and gas development on private property that is otherwise currently blocked from the benefits of oil and gas development,” he said.

A West Chester resident recently penned an op-ed in the Cincinnati Enquirer opposing the bill, citing an explosion in a Belmont County well that a Harvard University public health study identified as one of the largest methane leaks in U.S. history. Rob Brundrett, executive director of the Ohio Oil and Gas Association, responded with his own op-ed. In defending the bill, he cited the MWCD and its lack of “hindrance to parkgoers or the land” that has funded various park programs.

“This partnership is a testament that responsible energy development and conservation are not mutually exclusive,” he said.

Randi Pokladnik, a retired research chemist, lives near Tappan Lake and has long opposed drilling in the area and MWCD’s role facilitating it. She’s quick to share the scientific evidence of human health risks the state of New York cited in its decision to ban fracking in the Empire State. Or the hollow promises of economic development from the industry in resource-rich areas that nevertheless trail state medians in employment and income.

What the MWCD looks like now, she figures, is what a drive to a state park might feel like in 10 years.

“We could randomly pick roads and we’d hit something,” she said, referring to the endless stream of brine trucks, plants, and signs warning of pipelines underground. “All this stuff goes with fracking.”

Why is a conservation district fracking?

The MWCD formed in 1933 after a devastating 1913 flood killed 615 Ohioans. It reaches from Marietta, to Akron, to Mansfield, and almost over to Buckeye Lake. Its original mandate was simple: prevent floods via a series of dams and protect the watershed of the Muskingum River.

Along with conservation and flood prevention, Butler counts recreation as a third goal of the agency. The MWCD estimates 4.1 million visitors came to its lakes and parks in 2021, including 735,000 to Tappan.

In an interview, he called the gas operations underneath the reservoir a “means to an end.” They provide the district financial stability. They fund the hundreds of millions in dollars of upkeep to the Muskingum dams or infrastructure around parks in the district, including a new $6 million marina at Tappan Lake. And they fund conservancy operations, like water quality improvement or solar panel projects.

Auch has long opposed the MWCD. He doesn’t trust the industry or its regulators to adequately ensure wastewater, stuffed into injection wells, doesn’t contaminate other water sources. He insists the MWCD is selling unsustainable amounts of water at far too cheap a price. The watershed is a critical resource, he said, but its landscape has been irrevocably altered by mining and drilling in the area. A warming planet and increased heat and drought stress, he said, will likely test its water storage capabilities.

And why, he asked, is a district ostensibly focused on conservancy working hand-in-hand with fossil fuel companies?

“In my mind, it’s a betrayal of their mandate,” he said. “This is an agency operating in Southeast Ohio with its hand on the spigot of the water for the unconventional oil and gas industry and, to me, they’re giving it away for pennies on the dollar.”

He’s not the first to make the argument. Leatra Harper, a clean water advocate, sued the district in federal court through a legal mechanism allowing her to file on the federal government’s behalf. When the federal government deeded the MWCD some of its land in 1949, the deed provided that if MWCD ceases using the land for recreation, conservation, or reservoir development, or otherwise “alienates” it, then the land goes back to the federal government.

She lost in district court. The Sixth Circuit Court of Appeals reviewed the case and upheld the ruling, with a 2-1 majority finding that because the MWCD never knowingly concealed its drilling engagements and actively publicized them, it can’t be held liable.

Like others interviewed for this article, she mentioned what’s sometimes known as “the resource curse” – a paradoxical trend of resource-rich areas to miss out on riches from minerals extracted from their borders.

“If extraction made people rich, then southeast Ohio would be the richest part of the state, not the poorest,” she said in an interview. “It just doesn’t add up.”

Butler said financial pressure, in part, steered the MWCD toward entering the leases. It traditionally drove revenue from “assessments” (basically a tax) on residents, park fees, or much more modest oil and gas leases. That left little spare cash for upkeep. And around 2015, MWCD needed about $196 million to rehabilitate some of the river’s 16 dams.

Butler said besides financial pressure, state unitization laws – which essentially allow a driller to operate if it obtains lease agreements with just 65% of leaseholders in the unit – risked forcing the district’s hand. By entering the leases, Butler said MWCD wielded more control and placed different safeguards within the contracts.

While the hundreds of millions of gallons of water per year sound like a lot, he noted it’s a small percentage of the 11 billion gallons Tappan Lake holds. Adopting a common industry refrain, Butler called shale gas a “bridge fuel” that’s cleaner than coal but can carry the country until renewable energy sources scale up.

As earth continues to heat up as the result of increasing amounts of carbon trapping heat in the atmosphere, scientists almost universally agree that mankind must transition away from fossil fuel sources and toward renewables.

Butler said he believes in climate change, but said he didn’t see any dissonance between that acknowledgement and a government body signing a $40 million lease with an oil and gas company.

“I’m worried about climate change,” he said. “I’m not a climate change denier by any stretch of the imagination.”

Jake Zuckerman covers state politics and policy. Read more of his work here.

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