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Some landowners holding back, banking on economic improvement to bring better offers from drillers.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The offer is somewhat unconventional, but a natural gas company that’s leasing land in Luzerne County says its deal is a successful compromise for both parties, and leaseholders agree.

Denver-based WhitMar has locked up more than 22,000 acres in, among other places, Fairmount, Ross, Lake, Lehman, Union, Hunlock, Huntington and Dallas townships, according to company representative Brad Shepard.

The company is offering an unusual deal that has garnered both accolades from landowners for navigating the money squeeze caused by the recession and criticism for its lack of a long-term commitment. WhitMar, which Shepard said is involved in similarly complicated and expensive drilling operations in Oklahoma, Arkansas, Louisiana, Utah and the Dakotas, is offering a four-phase lease.

Landowners receive $12.50 per acre for the first year, after which the company decides whether it will continue the lease for a second year at the same payment rate. The lease also requires that within the first year the company begin the permit process for drilling at least one well and within the second year begin drilling at least one well.

For the third year, the company will offer a $2,500-per-acre, five-year lease on the properties it wants to keep, and landowners whose land gets drilled also will receive 19.5-percent royalties. Conservation Services, the company that amassed most of the territory, receives .5 percent of the royalties.

“As far as I know, that’s the highest royalty that’s been signed in Pennsylvania or New York,” Shepard said. “The reason we offered that royalty is literally because the landowners were willing to let us come in and test it up for $12.50” per acre.

The company then retains an option for a second five-year, $2,500-per-acre lease. “All together, it could be a 12-year lease,” Shepard said, but noted that the leases dissolve if the landowners aren’t paid. “So if they don’t receive a $2,500 payment or a $12.50 payment, the lease has expired because we didn’t pay them like we said we would.”

The offer has aroused reactions on both sides among affected landowners. Some urge restraint, predicting that better offers will crop up when the economy rebounds. “Right now, (gas companies) are picking all this low-hanging fruit,” said Ken Long, an executive committee member of the South West Ross Township Property Group that declined to recommend WhitMar’s offer to their group. “People are panicking to sign leases … because they want to get this monkey off their back.”

Landowners who signed leases note the generous royalties and the commitment to quickly begin exploration drilling. “I firmly believe that a sweeter, more lucrative deal can not be found in Luzerne County,” leaseholder Michael Giamber noted in an e-mail. “By comparison, the folks in Dimock (a truly proven area) can only get 18 percent. Over 30 years, a 2-percent difference in royalties can literally add millions of dollars in a landowner’s pocket.”

Shepard added that forced drilling likely means additional drilling will occur. “For the most part, once the drill rig’s brought in, it’s not brought in to drill one well,” he said. “As long as they hit, we have every intention of drilling as quickly as we can and our partner wants us.”

The company is still working out important specifics, though. First, it needs to find a larger partner to help drill, Shepard said, and it also must secure the rights to millions of gallons of water for the process that cracks the underground shale and releases gas.

In nearby counties, the company is working with Houston-based Carrizo Oil & Gas, Fort Worth-based XTO Energy, Inc., Louisiana-based Stone Energy Corp. and others, Shepard said.

He added that the company has received many offers from landowners to sell surface water on their properties, but said the company is not yet at the stage where it’s investigating water-acquisition options.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

Area group advises residents to be patient, don’t agree to low rates offered by drillers.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

ROSS TWP. – Gas-lease offers might be low, thanks to a lagging economy, but that’s not stopping drillers from proposing them.

Three gas companies are speaking with landowners in Luzerne County, and a fourth – Denver-based Whitmar Exploration Company – is covering leases, according to members of the South West Ross Township Property Group.

“Right now, they’re picking all this low-hanging fruit,” said Ken Long, a member of the group’s executive committee. “People are panicking to sign leases … because they want to get this monkey off their back.”

The in-depth, confusing and potentially disastrous decisions involved with signing a lease weigh on people, he said, and with offers crashing from one-time highs in the thousands of dollars per acre to Whitmar’s current $12.50 per acre, some landowners are eager to get whatever benefit they can and move on.

That, the committee warns, would be a mistake. “It’s not just going to be for today,” said Marge Bogdon, a member of the committee. “If you’re going to hurt your children or your grandchildren by signing a lease today, that’s bad.”

That’s why the committee has decided not to recommend Whitmar’s offer to their members and crafted 10 questions it says will combat “gas-rush fever.”

A large part of the rush is created, they say, by owners afraid they’ll miss out on everything if they don’t sign for peanuts now. Add to that pressure sales tactics levied by the companies, and the committee members foresee an ominous formula for rash, uninformed decision-making. They cite as example a recent missive from Conservation Services, the land-acquisition company employed by Whitmar. Announcing two meetings during which leases could be signed, the letter gave landowners six days to join before the offer was closed. Committee members said they received the notices with only about four days to decide. “If you only have two days to sign a lease, you can’t get a lawyer to look it over,” Bogdon warned.

Mark Stransky, another member of the committee, said he stopped by one of the signing meetings and found it “lightly but steadily attended.” Whitmar’s offer, as presented to the committee, was $12.50 per acre for the first two years, and the company would have the option to drop the lease after each year. In the third year, the company would pay a one-time bonus of $2,500 per acre to lease the land for the next four years.

“People are wondering if this is the only game in town,” Stransky said.

But the truth, the committee contends, is that lease offers will increase, not dry up, as the economy re-emerges, and that companies are likely cashing in on economic fears to score discounted leases. “You can lease with just about anybody,” Long said. “They’re taking everything they can at a really cheap price.”

“They’re coming out of the woodwork now with the Marcellus gas being proven,” Stransky said.

Near the beginning of the year, the group represented roughly 10,000 acres around Ross Township, but the committee members figured they’ve added on several thousand since then. They stress membership is nonbinding, and that landowners can opt out by writing a letter and waiting 10 days.

Though they receive no compensation for their efforts, they’re rewarded, the committee members say, by preventing their community from being spoiled. “If we weren’t part of this community, we wouldn’t be so concerned,” Bogdon said. “This is our home.”

And while they bear no animosity toward the drillers and landmen for their pushiness – “They’re salesmen; that’s their job,” Bogdon acknowledged – the committee members’ local ties, they say, are the best arguments for why their fellow landowners should hear them out. “Who’s going to tell you the truth, the people who are trying to help out the community, or the ones who are trying to make money off you?” Long asked.

10 Questions

If you go

The South West Ross Township Property Group’s executive committee has crafted these questions to help landowners scrutinize lease offers:

Has an attorney versed in oil and gas leases reviewed the lease?

Do I understand in detail exactly what I’m signing?

Are the terms and financial aspects of the lease acceptable, or will I regret signing it later?

Am I signing this lease just because a neighbor did or a landman claims a neighbor did?

Would waiting be more beneficial?

Can I afford to wait?

Does the lease protect everything I want protected?

What does my property owner group think about this lease?

What would my dad say?

Am I being pressured to sign this lease, forcing me to skip over things on this list?

What: South West Ross Township Property Group’s next meeting

When: 7 p.m., Tuesday

Where: Sweet Valley Church of Christ

Why: Dale Tice, an attorney with gas-lease experts Greevy & Associates, will speak.

More info: Call 570-256-4488 for an informative phone message or go to: www.rosstwpgas.com

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

Needs assessment says most workers would be general laborers with basic skills.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

As the natural-gas drilling industry ramps up in Pennsylvania’s Marcellus Shale, it could employ perhaps 13,000 workers by 2012, the vast majority of them general laborers with basic skill sets, according to a needs assessment released last week by the Marcellus Shale Education & Training Center.

“There’s going to be a significant amount of folks needed across many occupations, but the bulk of the activity when it’s in the drilling phase – up to 75 percent – is going to require some entry level of the industry, but not necessarily a degree, which is a good opportunity for most folks who are displaced … by the economy,” said Jeff Lorson, an industrial technology specialist at Penn College in Williamsport.

The report focuses on the 13 counties in the Northern Tier and Central regions of the state Workforce Investment Board, but Lorson noted that the report assessed only direct employment by the industry, so jobs created in other industries to serve or support the drilling industry would raise the number.

The 13 counties do not include Luzerne, but do include all those on its western and northern borders: Wyoming, Sullivan and Columbia.

The report made “low,” “likely” and “high” estimates for positions in three phases: pre-drilling, drilling and production.

The vast majority would be needed in the pre-drilling and drilling phases, in which jobs are short-term and require regular relocation but limited skills. The assessment found that each well drilled would require “more than 410 individuals working within nearly 150 different occupations,” the total hours worked by them equaling about 11.53 full-time workers. The number of workers is linked to the number of wells drilled, however, so it would be reduced whenever the industry contracts.

A much smaller number of jobs would be required for production, but those jobs would be long-term and require more-specific skills. It would take about six wells to create one of these jobs, the assessment reports, but the jobs compile, so new jobs are being created over the years whenever wells are drilled.

Using a multiplier created by the Pennsylvania Economy League, the report suggests that nearly 20,000 non-industry jobs would be created by industry activities in the Northern Tier and Central regions.

Penn College is using the report’s results to refine its educational offerings through the shale training center. It will begin a “roustabout” program, Lorson said, that will provide general industry knowledge, occupational safety training and environmental awareness.

“They have a real feeling in the industry to start at the bottom and work their way up,” he said.

The report’s results jibe with the industry’s own assessment in 2006, according to Stephen Rhoads, the president of the Pennsylvania Oil & Gas Association. “They’re finding out what we’ve already known,” he said, adding that the industry is talking about setting up a statewide education program in high schools, vocational schools and higher-education institutions to prepare basic workers but also provide the education needed for advancement.

He pointed to a program in place at the University of Pittsburgh at Bradford in which rig workers take night classes to earn an associate’s degree needed for jobs to assist geologists and engineers.

“Many of the jobs in the industry that are in highest demand are people who man the drilling rigs and well servicing crews and people” who manage well sites, he said. “They don’t require advanced degrees. You need a good worth ethic, a high school diploma, and in many cases you have to be able to qualify for a driver’s license.”

TO LEARN MORE

To find the report, go to: www.pct.edu/msetc and look for the “Needs Assessment” link about halfway down the page.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader