Exclusive: In clash with pope's climate call, U.S. Church leases drilling rights

By Richard Valdmanis
Reuters
September 22, 2015

http://www.reuters.com/article/2015/09/22/us-pope-usa-drilling-idUSKCN0RM0AY20150922

St. Mary's Catholic Church is seen in Guthrie, Oklahoma, September 15, 2015.

Casting the fight against climate change as an urgent moral duty, Pope Francis in June urged the world to phase out highly-polluting fossil fuels.

Yet in the heart of U.S. oil country several dioceses and other Catholic institutions are leasing out drilling rights to oil and gas companies to bolster their finances, Reuters has found.

And in one archdiocese -- Oklahoma City -- Church officials have signed three new oil and gas leases since Francis's missive on the environment, leasing documents show.

On Francis' first visit to the United States this week, the business dealings suggest that some leaders of the U.S. Catholic Church are practicing a different approach to the environment than the pontiff is preaching.

Catholic institutions are not forbidden from dealing with or investing in the energy industry. The United States Conference of Catholic Bishops' (USCCB) guidelines on ethical investing warn Catholics and Catholic institutions against investing in companies related to abortion, contraception, pornography, tobacco, and war, but do not suggest avoiding energy stocks, and do not address the ownership of energy production interests.

A Reuters review of county documents found 235 oil and gas leasing deals signed by Catholic Church authorities in Texas and Oklahoma with energy and land firms since 2010, covering 56 counties across the two states. None of the Texas leases in the review were signed after the pope's encyclical.

Those two states have been at the forefront of a boom in U.S. energy production in recent years, often through the controversial hydraulic fracturing production method, known as fracking.

It was not clear whether production on the Church leases was through fracking - a process that involves injecting sand, water and chemicals underground to crack open rock formations -- or more conventional drilling methods.

The Church authorities receive a royalty ranging from 15 to 25 percent of the value of what is taken out of the ground, according to the leases, which are public documents filed with county clerk offices. Reuters' search method did not capture leases signed before 2010 but which may still be in force.

"There may be some kind of inconsistency here between what the pope has said and what the Church is doing in U.S. oil and gas country," said Mickey Thompson, a consultant and former director of the Oklahoma Independent Petroleum Association.

He added that since the Church often acquires its mineral rights through donations from parishioners, there could be "legal or fiduciary reasons" it has sought to lease them out. It was unclear if that was the case with the leases signed by Church institutions in Texas and Oklahoma, including the three leases signed in Oklahoma since June.

A USCCB official and a spokeswoman for the Oklahoma City archdiocese both declined to comment.

The Vatican does not have direct power over investment decisions taken by dioceses in the United States, a responsibility reserved for their bishops.

Members of the U.S. Catholic hierarchy have fallen out of line with papal administrations before. Last year, for example, U.S. Cardinal Raymond Burke was moved out of a senior post in the Vatican after clashing with Francis’ more liberal views on homosexuality and Catholic re-marriage.

MORAL DISSONANCE

A Reuters examination of financial disclosures by U.S. Catholic institutions in August found that they have millions of dollars invested in energy companies, from hydraulic fracturing to oil sands producers. One U.S. archdiocese, Chicago, told Reuters it planned to review its energy shareholdings in light of the pope’s June message.

But the Church's direct links to the fossil fuels industry through the Oklahoma and Texas lease deals highlight a potentially deeper moral dissonance in the wake of the pope's unambiguous attack on human-caused climate change.

Francis makes his first visit to the United States from Tuesday through Sept. 27 with stops in Washington, New York and Philadelphia.

In Texas, dioceses that granted oil leases in recent years included Dallas, Fort Worth, Austin, and San Antonio.

Pat Svacina, a spokesman for the Diocese of Forth Worth, said the diocese received $31,661 from its leases in fiscal year 2015. He declined to say whether the diocese was considering reviewing its oil and gas leasing program in light of the pope's encyclical.

"The way the leases are written it is very difficult to cancel a lease that is in production," Svacina said. "The Diocese always reviews the viability and desirability of renewing a lease at the conclusion of a current lease," he added, without elaborating.

In Oklahoma, about one quarter of the roughly 165 Church lease deals signed since 2010 were granted by the Archdiocese of Oklahoma City, with most of the rest granted by the Catholic Foundation of Oklahoma and the St. Gregory's Catholic University of Oklahoma.

DONATED RIGHTS

Oklahoma City Archbishop Paul S. Coakley signed the most recent deal on Sept. 3, giving privately held oil company Comanche Resources rights to operate on 160 acres in Major County in exchange for 18.75 percent of the value of the oil and gas produced.

The two-year extendable lease also permits Comanche to lay pipes, build storage tanks, power stations, and other installations.

Coakley signed similar deals with energy companies Continental Resources and Lance Ruffell Oil in July and August, with royalties of 25 and 20 percent respectively.

A spokeswoman for the archdiocese declined to comment, and efforts to reach Coakley were not successful. The spokeswoman also declined comment on behalf of the Catholic Foundation, where Coakley serves as chairman.

An official at St. Gregory's said the university had been given significant mineral rights by donors, adding that the royalties collected had averaged about $405,000 over the past three years, or 3.7 percent of revenue. The official asked not to be identified.

While the Church provides little data on its finances, information from other Catholic institutions in Oklahoma and Texas showed oil and gas royalties yielded a small portion of overall revenue in recent years, partly reflecting a slide in energy prices.

A review of audited statements issued by the Archdiocese of Oklahoma City between 2010 and 2013 showed that the oil and gas royalties made up 2 percent of total revenue, or $1.6 million, over that period. That share peaked in 2012 at 5 percent, or $704,399, according to the audited statements. The other Oklahoma institutions did not provide data.

A spokesman for the Archdiocese of San Antonio, Jordan McMurrough, said the archdiocese had been collecting small energy royalties on its mineral rights since the 1950s, but that they currently make up less than 1 percent of revenue.

"The archdiocese currently does not plan changes to its long-standing practice of granting oil and gas leases," he said, adding that Archbishop Gustavo García-Siller "is well aware of and deeply respects" Pope Francis' encyclical.

He said one-third of the archdiocese's mineral rights were donated, with the rest "by acquisition for church purposes over the years."

Officials at the other dioceses in Texas did not respond to requests for comment.

Other companies that have signed energy leasing deals with the Church in recent years include Apache Corp, Cabot, Chesapeake, Devon Energy, and Range Resources.

All have been active in a fracking boom over the past several years.

A spokeswoman for Apache Corp confirmed the company has "a very limited" number of leases with the Church, but declined to comment further. The other firms did not respond to requests for comment.

Fracking has led to a surge in U.S. production by making new reserves available to the industry, and contributed to the slump in world energy prices. But the drilling boom has raised worries about pollution, climate change, and potentially damaging earthquakes from wastewater injection -- fears that the oil industry says are overblown.

The American Petroleum Institute has said technological advances and efficient regulation have allowed drillers to raise production without contaminating water supplies or increasing emissions of methane, a greenhouse gas.