Rural Grant Makers Seek to Attract Gifts From Landowners Made Wealthy by Fracking

People traditionally of modest means in this rural corner of northern Pennsylvania suddenly have a chance to aid long-strapped local charities, educate more young people, and build better health-care systems. But if it happens, it may come at a price.

Farms and vast acres of land here are now being mined for the oil and natural gas that lie deep within the earth. Hydraulic fracturing—commonly known as “fracking,” the process by which the oil and gas are extracted from shale—is producing a windfall for people here and in other parts of the country that could eventually bring about a boom in philanthropy.

Fracking is controversial because of its potential to harm the environment and the health of local residents. But ask Peter Quigg about the growing presence of gas companies here in Susquehanna County and the environs, and he sees nothing but green.

“It’s a marvelous time,” says Mr. Quigg, president of the Community Foundation of the Endless Mountains, a grant maker here that serves five counties north of Scranton with a combined population of 200,000.

In addition to the mining companies that now support local charities, he says, some residents are giving their newfound wealth to nonprofits.

Not Used to Wealth

Areas like this—and other places like western North Dakota, where the fracking industry is also booming—are used to getting by with a chancy agricultural economy.

“For farmers who have struggled financially for years, if not generations, this is their day,” Mr. Quigg says. “And for us, there’s hope for a future where philanthropy is something that local people come to understand and practice.”

But the sudden influx of wealth and the modest circumstances of the people receiving that wealth make it challenging for community foundations like Mr. Quigg’s to grab their share of it.

Simply put, many of the families in this region who are making money from mineral rights aren’t used to having a lot of money.

So far, many fracking windfalls are being used to pay off farm debts, buy new equipment, build barns, or send children to college, Mr. Quigg says.

What’s more, the bankers and financial advisers that community foundations rely on for help in reaching donors often have no connections to these newly wealthy residents.

Cabot Oil and Gas, a Houston company with the largest presence in the area, “is paying royalties in large checks to people here who don’t have bank accounts,” says Mr. Quigg.

Small community funds like his are now trying to figure out how best to reach donors. “Planned philanthropy is often a foreign concept here,” says Mr. Quigg.

‘That’s Good Money’

So far, a handful of families who have made money by leasing their mineral rights have started donor-advised funds at the Community Foundation of the Endless Mountains. Their gifts have been used to support local churches, a hospital, a library, and college scholarships.

Since 2008, when the boom came to this region and companies began to pay signing bonuses to landowners for the right to drill in the Marcellus Shale, the community foundation has brought in $130,000.

“That might not seem like much, but for around here, that’s good money,” says Mr. Quigg, whose foundation holds $7-million in assets.

He believes that giving from individuals will grow.

“We’re still in the infancy of all this,” he says. “And we’re strapped to a rocket ship. Our analysis shows that there could be a 50-year production window. We’ll likely see people become more generous as the years go by.”

A Cautious Approach

As foundation leaders in Pennsylvania begin to calculate how much wealth may eventually come from fracking, they’re still approaching potential donors with caution.

“You can drive down any road and see new barns popping up and realize that all these people have leases,” says Betsie Trew, president of the Washington County Community Foundation, in the southwestern part of the state.

“But we don’t go knocking on doors,” she says. “We make sure we don’t treat individuals who have money from gas development any differently than any other donors.”

The foundation spends a good bit of time talking with local accountants, lawyers, and bankers who, it hopes, will inform people with gas wealth of its fund options and the tax benefits that can come with them.

Since 2010, the Washington County foundation, with total assets of $15-million, has reaped $600,000 in donor-advised funds from leaseholders who have received bonuses from gas companies and a smaller amount in donations from energy firms that work in the area.

So far, five people have created donor-advised funds based on royalty payments, but none have yielded any value for their funds because drilling has slowed as the market price of natural gas has tumbled.

Quiet Donors

Besides the unreliability that can come with the ups and downs of the energy industry, grant makers say they can’t count on donors with gas or oil money to publicize their gifts—something that might help them persuade other people to follow suit.

“People are very humble here,” says Ms. Trew. “They want to give to local causes—churches, community groups, after-school programs—and otherwise want to be left alone.”

Mr. Quigg echoes that assessment: “Our job is to get out to these folks and tell them we’re there to help them without looking like we’re only there to take their money.

“These are very quiet people who aren’t used to having much. For us to go in and say, ‘Hey, why don’t you give us some of your money?’ wouldn’t go over very well.”

Gas-Company Gifts

Community foundations have had much more immediate success courting the half dozen or so energy companies that are now at work in northern Pennsylvania, say Mr. Quigg and other community-fund leaders.

For example, Cabot Oil and Gas donated $2.2-million to help build a new hospital just south of Montrose and encouraged the community foundation to raise $1.2-million from other sources, which it did last year in just four months.

The gift from Cabot also helped persuade the Harry and Jeanette Weinberg Foundation to make a $1-million gift. The hospital, which will cost $15-million to build, is scheduled to open in late 2014.

Cabot and other companies have also supported a local bookmobile, emergency services, school for the deaf, several human-needs charities, and youth programs.

“We want the entire community to grow and prosper,” says George Stark, a Cabot spokesman.

The company has emphasized giving that helps strengthen the local business community, health care, and schools. It encourages local businesses, grant makers, individuals, and other energy companies to offer matching gifts, he adds.

Gas-company managers have become popular people, Mr. Quigg says: “There’s a story about a gas-company executive having dinner here in town. He got a proposal from a different charity during each course—appetizer, entree, and dessert.”

Still Waiting

Charities in fracking country may need to be patient with newly rich landowners as they await support, foundation leaders say.

At the North Dakota Community Foundation, Kevin Dvorak, the fund’s president, is still waiting for a flood of donors made rich by fracking leases five years after the boom started.

“It usually takes at least four or five years for it to kick in to people that they’ll have more money than they’ll ever be able to spend,” says Mr. Dvorak. In anticipation of that time, he adds, “we’re building relationships.”

In North Dakota, about half of those leasing mineral-rights are farmers who grow canola, corn, durum wheat, and spring wheat. The others are out-of-state property investors.

Farm families tend to support themselves first and then their churches, Mr. Dvorak says. They don’t think about much else.

“Some people are receiving $500,000 for the first six months of drilling,” he says. “If you were a subsistence farmer before that, you might not be able to see how your life will change.”

Among the advantages Mr. Dvorak’s organization touts to prospective donors is a state income-tax credit that offers a break to people who endow funds or charities.

Designed to capture some of the wealth leaving the state during its current oil boom, the credit has begun to catch on with donors, he says.

Growth Spurts

The community foundation and several affiliated funds in the “oil patch” are starting to see results—like a scholarship fund started with mineral-rights money and some help for hospitals and youth programs.

Given that the Bakken shale field beneath North Dakota is predicted to produce for 25 years or more, charities and grant makers can expect to see as much as 50-percent growth in their assets in the coming years, Mr. Dvorak says.

In the past decade, the North Dakota Community Foundation has already seen its net worth quadruple.

“Directly, we may have grown by 15 percent or so because of the Bakken field,” he says. “But the North Dakota economy is doing so well over all because of energy development, and we’re benefiting from that.”

Rift Among Residents

Back in Pennsylvania, Mr. Quigg worries about a growing rift between people making money from the gas boom and people who have moved to the area for the pastoral lifestyle.

Vera Scroggins, who moved to nearby Brackney from New York’s Long Island 23 years ago to, she says, “escape high concentrations of population and all that came with it” is one of many local activists raising concerns about fracking.

She has led well-publicized “fracking tours” of the region for celebrities, including Yoko Ono and Susan Sarandon, and helped those who have sometimes suffered from polluted air and water in nearby towns tell their stories nationwide.

Ms. Scroggins wonders whether the community foundation will someday come to rue its connections to gas companies and landowners.

“They might be compromised when they’re confronted by people who have been hurt by this,” she says. “What will they do as the evidence mounts about fracking’s unintended consequences?”

For his part, Mr. Quigg says he’d be happy to embrace those who seek to keep northern Pennsylvania beautiful and safe.

“If anti-gas people want to come here and start an environmental fund, we’ll do that too,” says Mr. Quigg. “We all have our concerns. We want to see that all this is done properly.”