Archive for the ‘Pennsylvania Natural Gas Drilling’ Category

The Associated Press
HARRISBURG — Despite opposition from environmentalists, the Rendell administration will give exploration companies thirsty to capitalize on sky-high natural gas prices new territory to drill in Pennsylvania’s state forests.

Read more Natural Gas Leases – Marcellus Shale articles

The state Department of Conservation and Natural Resources said it is ending a five-year-old moratorium on allowing new shallow wells, and that it will auction the rights to drill on an additional 75,000 acres of state forest land for the first time since 2002.

If successful in the bidding that will take place later this year, the exploration companies will be able to take a shot at two deep gas reservoirs, the Marcellus Shale formation, about 6,000 to 8,000 feet underground, and the Trenton-Black River, which is more than 10,000 feet deep.

Both are thought to contain large quantities of natural gas, and have drawn the interest of exploration companies from Texas to Canada that have asked for access to all of Pennsylvania’s 2.1 million acres of state forests.

Much of the land to be leased is in north-central Pennsylvania, and department officials argue that the deeper wells, spaced farther apart, inflict less forest damage than shallow wells, which are typically drilled closer together.

New shallow wells may only be drilled if gas is found during the development of deeper gas fields, officials said.

“We’re very excited about the opportunity,” said Stephen W. Rhoads, the president of the Pennsylvania Oil and Gas Association, “We just wish it were larger; 75,000 acres is not a whole lot of land.”

Jeff Schmidt, who directs the Pennsylvania chapter of the Sierra Club, said the department gave in to pressure from oil and gas company lobbyists, as well as legislators sympathetic to the industry.

“These are publicly owned lands and we don’t believe the average citizen supports turning over these lands to the oil and gas industry,” Schmidt said.

“We just wish it were larger; 75,000 acres is not a whole lot of land.”

Stephen W. Rhoads
Pa. Oil and Gas Association

Copyright: Times Leader

Experts tell landowners to understand everything they are signing related to leases.

LEHMAN TWP. – Natural-gas drillers seem to be taking “a wait-and-see attitude” right now, according to Ken Balliet, a Penn State Extension director well versed in gas-lease issues.

If exploratory wells being drilled this summer are productive and some state regulatory issues are ironed out, gas-lease offers could jump, he said.

But as anticipation builds over natural-gas drilling in the region, here’s one thing landowners can expect.

“As soon as you sign a lease, in a few days or weeks, the price (others sign leases for) is going to go up,” Balliet said. “You’ve gotta understand this is still a highly speculative play.”

That said, landowners have many other issues to consider beyond the bottom line, according to other experts who spoke at a gas-lease workshop on Monday evening at Lake-Lehman High School. There are environmental, liability, property rights and payment issues that should be considered.

For Luzerne County landowners who are undergoing property reassessment, another concern is retaining the land’s “clean and green” tax abatement status. Dale Tice noted that the financial risk could be transferred to the drilling company. Tice, an oil and gas attorney, said an addendum could be added to leases to require drillers to pay any rollback taxes.

Another important lease consideration for farmers is making sure the drillers isolate the topsoil during excavation, pointed out Joe Umholtz, an oil and gas program manager with the state Department of Environmental Protection. DEP doesn’t have a regulation requiring that, he said.

Tice also mentioned inserting compensation clauses for crop loss and land damage.

Beyond soil and groundwater pollution or water usage, landowners should consider the sound pollution from compressor stations and other machinery.

While all the issues probably won’t deter wildlife indefinitely, drillers can arrive at any time of year, so owners should prepare accordingly for hunting seasons, the experts said.

Regarding payments, owners should be aware that companies currently deduct transportation costs for getting the gas to market, Tice said, but legislation is pending to ban that. Also, while companies might offer owners the opportunity to use as much gas as they want, the pressures involved make it practically unreasonable, so Tice suggested that owners negotiate for payments in lieu of the gas.

It’s also important, he said, to restrict lease rights to only what might come up from the well because a broader lease might allow extraction of other minerals.

Finally, he advised against allowing options to re-lease land, but instead offer the first right to refuse a new lease offer.

“If they drill a well, that means you’ve got one chance to get this lease correct. You need to be sure you understand everything you’re signing,” he said.

Copyright: Times Leader

Penn State study finds money Pa. landowners receive will ripple through state economy.

The Associated Press

STATE COLLEGE — With energy companies rushing to lock up rights to suddenly valuable deposits of natural gas, royalties earned by Pennsylvania landowners will ripple through the broader state economy, according to a Penn State University forecast.

Royalty payments will spur additional spending by landowners throughout the economy and lead to the creation of new jobs that will attract workers, researchers said.

There has been something of a land rush in parts of Pennsylvania recently as energy companies negotiate leases to drill into previously untapped reserves of natural gas.

A rock formation in parts of four states, called the Marcellus Shale, is believed to hold a large reservoir of natural gas. Geologists and energy companies have known for decades about the gas, but only recently have figured out a way to extract it.

In their study, Penn State researchers used $1 billion in annual royalty income as a yardstick to measure potential gains in employment, disposable income, population and other economic indicators in Pennsylvania through 2011. The actual amount of royalty income could be higher or lower; the study did not provide a forecast.

“It’s a real unknown at this point,” David Passmore, director of the Penn State Institute for Research in Training and Development, said Tuesday. “Royalty income only occurs when the asset is lifted out of the ground. When the gas comes out, nobody knows. How much comes out, nobody knows.”

According to the researchers, each $1 billion in royal

Copyright: Times Leader

Real-estate pros say chance of lucrative deals causing less land to be available for sale.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Listings for land are virtually nonexistent in northern Luzerne and Wyoming counties, thanks to landowners hoping to cash in on natural-gas leasing rights.

“If people want to come up to buy land, there’s really not much to show them, if anything. And that’s a factor of the gas situation,” said Donna LaBar, who owns Century 21 Sherlock Homes Inc. offices in Clarks Summit and Tunkhannock.

It’s an unfavorable situation for anyone hoping to join in on the profits from gas exploration in the area. Companies are banking that a vast, but deep, layer of rock called Marcellus Shale contains natural gas deposits.

Landowners in Wyoming County and other northern counties have been offered $2,500 per acre to sign away the gas rights. Those offers have skyrocketed with recent drilling success.

In January, some landowners signed for just hundreds of dollars per acre.

Early estimates hold that the amount of gas that potentially could be extracted from the entire layer, which stretches from upstate New York to Virginia, including parts of Luzerne County, could fulfill the country’s natural gas consumption for two years.

The deposits have been known for decades, but technology only recently has improved enough to make extraction economically feasible.

LaBar, a real-estate broker since 1984, said prices in the residential market are holding steady and properties are available.

“The normal market, which would just be the residential sales market, is still pretty much normal. Average market for this time of year,” she said.

However, the number of available tracts larger than 5 acres drops off significantly, she said. “People just aren’t really selling their land right now because they’re looking forward to royalties for the gas leases,” LaBar said.

The effect is more pronounced at her Tunkhannock office, she said. “It’s mostly the northern tier,” she said.

Several Luzerne County real-estate agents said land is still available in northern townships, such as Franklin and Lake, where shale deposits are predicted.

The industry is in its infancy, and few landowners who’ve signed up have actually seen royalty checks. However, if the deposit is anything like the Barnett Shale in Texas that it’s being compared to, drilling could become lucrative. Barnett has proven results, and The Dallas Morning News recently reported that leases are being signed near Fort Worth for $25,000 per acre.

LaBar said local landowners are now viewing their land differently. Before, it was simply an investment that had a tax liability.

Now, she said, “it could be actually an income asset for them, and it’s all yet to be seen.”

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

Copyright: Times Leader

School districts that sign a lease will receive money per acre, royalty checks on a regular basis.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

There are school superintendents who would drool over the windfall Bill Bush received around January. But Bush, the superintendent at Elk Lake School District, is looking for an even bigger payday.

The district essentially made $127,500 for nothing when it signed a gas lease earlier this year for its 170 acres in Susquehanna County. The district received $750 per acre and royalties of 12.5 percent.

With lease offers hovering around $2,500 per acre in some areas, the deal doesn’t seem as equitable as it once did.

“We were excited at the time, but not now,” Bush said. “I think anybody who signed a lease prior to today probably wishes they had waited.”

Still, the district jumped on the offer, he said, because the company assured it would drill a well on district property, guaranteeing the district a handsome royalty check on a regular basis.

With a furor building over the potential of the natural gas reserves locked in a rock layer that stretches from New York to Virginia, the decision is one that many school districts in the area might have to soon consider. Bush said he believes Elk Lake is the first district to sign, but others aren’t far behind.

Tunkhannock Area School District recently agreed to join a group of Wyoming County landowners who are negotiating a gas lease. Dallas School District is also discussing lease options.Bush said Cabot Oil and Gas Corp. is planning to have a well online by the 2009-2010 school year. It’s unclear how much the district stands to gain from royalties, but surrounding areas “indicate strong reserves,” Bush said. “If we’re consistent with what the project is locally, it would certainly be beneficial to the district,” he said.

So far, Elk Lake is attempting to ignore its financial good fortune, Bush said. The money it already received went to the general fund and disappeared in the district’s almost $17 million annual budget. Instead of counting down the days until royalties start rolling in, people in the district are looking at them as an unexpected bonus if they come.

“I think everybody’s kind of reserving judgment to see how it comes out,” Bush said. “I think they’ve remained grounded.”

Bush has modest plans for the funds, such as building and grounds maintenance and upgrading technology.

Beyond the royalties it would receive from drilling, the district retained the rights to 200,000 cubic feet of gas each year, which it could use or sell at market price. At prices calculated by the federal Energy Information Administration, the district would make about $1,500 from its yearly allotment. The district is considering switching from its oil-fired heating system to a natural gas one, Bush said.

The district also reserved other land rights in about two dozen addendums to the lease.

“Environmental concerns were first and foremost,” Bush said, but safety and other issues were included.

Beyond the royalties, the district retained the rights to 200,000 cubic feet of gas each year, which it could use or sell at market price.

Copyright: Times Leader

MOST CONSUMERS HAVE heard the cautionary phrase, “caveat emptor,” or “let the buyer beware.”

Turns out, for Pennsylvania landowners who are mulling natural gas lease offers, the seller better be careful too.

Deals are being sealed throughout Northeastern Pennsylvania as a result of a natural gas rush. The flurry began months ago, in part, because a Penn State University researcher and colleague in New York suggested that there might be a treasure trove of natural gas trapped within a rock formation known as the Marcellus shale.

This formation – which extends over parts of Pennsylvania and three bordering states – might contain more than 500 trillion cubic feet of natural gas, much of it previously inaccessible. Using updated drilling technology, however, industry watchers speculate that at least 10 percent of it could be recovered. Taking into account projected fuel prices, that makes the Marcellus worth about $1 trillion.

Consequently, drilling company representatives and other dealmakers have fanned out across Northeastern Pennsylvania, knocking on doors and making what might, at first, seem to be lucrative offers. But property owners would be wise to wait and get the facts, not quickly jump at an apparent windfall.

Experts advise that landowners don’t sign companies’ standard agreements, which tend to favor the drilling operators. Instead, negotiate.

People who had been offered $15 per acre two years ago have, in some cases, reaped new offers of as much as $2,500 per acre, according to one report.

Other equally important issues should be examined in the lease agreements.

Among the questions to consider: What percentage of royalties will be paid to the landowner? How might potential environmental impacts be addressed? Does the contract provide provisions releasing the landowner from liabilities, including failure of the drilling company to follow applicable laws?

In short, draft the best possible deal before signing on the dotted line. This unforeseen opportunity shouldn’t leave you feeling cheated.

LEARN BEFORE LEASING

For information on natural gas leases, television viewers can tune into an hour-long, call-in program at 7 tonight on the Pennsylvania Cable Network. The program also will be available on the Web at http://wpsu.org/gasrush.

A workshop on understanding gas leases is set for 7 to 9:30 p.m. June 23 at Lake-Lehman High School. Fee: $15. To register, call the Penn State Cooperative Extension office in Luzerne County at 825-1701.

Separately, gas-leasing information is available at Web sites such as

www.naturalgas.extension.psu.edu and www.pagaslease.com.

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

With lucrative natural-gas lease offers coming to Luzerne County, landowners are beginning to pool their land, resources and knowledge to score the best deals possible.

Gas companies are rushing to secure the rights to a layer of rock called Marcellus Shale. The shale is deep underground, perhaps as far as 8,000 feet, and stretches from upstate New York to Virginia. Though solid, the rock holds natural gas under intense pressure. The resource has been known for decades, but technology only recently improved enough to extract it economically.

One issue landowners might not be able to control is determining who owns the rock and gas.

“That’s a tough question. Eventually what’s going to happen is when push comes to shove … they’re going to do title searches” back about 150 years, said John Zucosky, who is part of a Franklin Township landowners’ group. His research, he said, produced evidence that gas and oil might not be included in the mineral rights. He said he hasn’t heard anything about anyone claiming to own the rights.

Many Franklin Township residents have attended meetings at which Matthew Golden, a West Pittston lawyer who’s worked in the gas industry, has outlined the leasing, drilling and clean-up processes. He pointed out companies will attempt to exploit landowners’ ignorance to get them to sign unfavorable leases.

“There’s a great disparity in knowledge between the companies’ land men and the landowners. This could open them (landowners) up to some risk,” Golden said.

Zucosky’s group, which is accepting new members, owns 1,500 contiguous acres in Franklin Township.

Zucosky said he got involved nearly a year ago when a Texas company offered to buy the mineral rights on his 100 acres for $300 per acre. Initially, he suspected it was akin to an e-mail scam, but some Internet researching convinced him the offer was genuine and that he could probably get a better one.

“I saw that contract. You have to be pretty naive to sign something like that,” he said. If the situation is as experts suggest, Zucosky said, “there’s a whole bunch of money involved.”

He’s already witnessing the rush. An offer of $2,000 per acre increased by $500 within a few days without any prodding from owners, he said.

The group is ironing out which issues it wants addressed in contracts. Then it will consider offers, and once an offer is accepted, will hire a lawyer to finalize the contract, Zucosky said.

“We’re trying to put a package together to address all the things we want … to try to get the most we could,” he said. “This is a once-in-a-lifetime thing, I think, so what the heck.”

online

For more information on gas leasing or to join a leasing group, go to www.pagaslease.com.

“I saw that contract. You have to be pretty naive to sign something like that.”

Landowner John Zucosky

On offer for his mineral rights
Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

TUNKHANNOCK – The Tunkhannock Area School District will join a landowners group that is uniting to negotiate natural-gas leases.

The decision was made by a unanimous vote of the school board Thursday evening at a work session.

The school district owns about 200 acres, all of which will be available for leasing.

It intends to join the already 900-member Wyoming County Landowners Oil and Gas Lease group, which controls 47,000 acres, according to group members.

The group has agreed to accept no offer less than $2,700 per acre, board President Jack Tomlin said.

That represents an influx of about $540,000 into the district’s coffers, and about $126.9 million for the group’s members.

Because the board wasn’t able to make a decision by the admission deadline created by the group, it will be put on a waiting list for the next round of member approvals, he said.

He said the board had individually sought offers from gas companies for its land, but had found the process untenable. The group’s $30 entry fee and access to legal representation made joining economical, he said.

“Part of it is there is no obligation to sign” any lease offered, he said.

The school’s holdings include four elementary schools, an administration center, a secondary school and a tract of empty land in a nearby township.

Jim Harvey, a member of the group, said just a month ago the agreed upon lease price was $2,100. At that rate, the district would stand to gain $420,000, and landowners would receive nearly $100 million.

As a taxpayer, Harvey was pleased with the board’s decision.

“It’s a huge chunk of money. It could be a free gift,” he said.

However, he was concerned that the pristine land could be polluted and ruined by drilling.

Jim Greenley, a fellow taxpayer, pointed out that opportunities to lower school taxes shouldn’t be missed.

“Our millage just went up tonight,” he said. “It might go down now.”

Copyright: Times Leader