Posts Tagged ‘drilling’

More than 650 acres are available. Drilling firms being contacted directly.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Luzerne County began seeking bids Monday to lease more than 650 acres at Moon Lake Park for natural gas drilling.

In an effort to entice a bidder, county engineer Joe Gibbons said he is contacting drilling companies directly.

“I’m trying to swing it in our favor. I’m sending e-mails out to the gas industry to see if anyone’s interested in receiving a set of bid documents,” he said. “It’s up in the air because the commodities are in the tank right now. … I’m kind of optimistic. I hope we get somebody.”

Potential bidders can review and pick up the documents at the county property and supply office in Penn Place at 20 N. Pennsylvania Ave., Wilkes-Barre. The bids are due by 2 p.m. April 23, but must be pre-qualified by April 9.

The proposal is modeled, Gibbons said, on that used by the state Department of Conservation and Natural Resources.

The request for proposals was structured, he said, so that the county receives several revenue sources from the deal and retains authority over where drill pads would be located in the park. “The last thing I want to do is make the place look like an open construction site. I want to maintain its recreational integrity. It’s just a unique project,” he said.

The county would receive income from the rental of the drilled acreage; the sale of the timber felled when preparing the drilling sites; other marketable fluids, such as methane or oil, that are extracted from the drilling; and storage fees for gas that is stored when an exploratory well is drilled, but capped until it can be hooked up to a pipeline, he said. “They can have the storage, that’s fine, but we get the storage rental,” he said.

All bidders would have to offer at least 16 percent royalties on the price at the well head for any marketable fluids it produces, he said.

The winning bidder will offer the highest initial-year rental fee for the acreage, he said, which was set for at least $500 per acre. After that, the fee drops to between $10 and $20 per year, he said, but there is a stipulation that drilling begin within a year.

The winning bidder would post three bonds, including one to ensure the site is restored after drilling concludes, he said. “I put restrictions on where they could take water from and how much they could take, even above and beyond what DEP (the state Department of Environmental Protection) would issue in a mining permit,” he said.

The bids would also have to be pre-qualified to ensure they are from actual drilling companies planning development and not land-holding companies expecting to resell the land, he said. “If we do get a lease, I want to deal directly with the gas company. I don’t want to go through a middle man,” he said.

Copyright: Times Leader

Senate hearing set for today at Misericordia, symposium Wednesday at Woodlands.

While landowners are imagining the gobs of cash they stand to make from natural-gas drilling in the Marcellus Shale rock layer underlying much of the region, Don Young hopes there’s room to imagine a few other images, such as gas pipelines crisscrossing once-pristine farmland, benzene contaminating groundwater supplies and an industrywide press to tap every inch of lucrative ground.

And that doesn’t include the Fort Worth, Texas, resident’s concerns about the psychological effects of celebrity-fronted publicity campaigns linking the drilling to patriotism and national security. “It’s Orwellian to see it happening here,” he said. “You’ve got American flags on each well.”

But the leader of Fort Worth Citizens Against Neighborhood Drilling Ordinance hopes the travails that now plague his home above the Barnett Shale are averted in the similar Marcellus Shale. “What you have here in Fort Worth on a grand scale is apathy. People felt, ‘We can’t stop it. It’s too big. It’s big oil,’ ” he explained. “The average busy person, they don’t have time to worry about gas drilling. … They have families, they have lives, they’re struggling, and if you have a few companies handing out money saying, ‘Here’s some money, just forget about it,’ ” they’ll do just that, he said.

Local regulators and educators are already taking steps to avoid those effects, and they’ll take a few more this week. This afternoon, the state Senate Republican’s Policy Committee will meet at Misericordia University to hear testimony from people familiar with dealings in the Barnett Shale on the potential effects awaiting Pennsylvania.

Several of the same speakers will be featured in discussions Wednesday morning at the Woodlands Inn & Resort in Plains Township, as the Joint Urban Studies Center holds a Marcellus Shale Symposium. The public is invited to either presentation, but the symposium has a registration fee.

“We are front and center to the development of this new industry,” said state Sen. Lisa Baker, R-Lehman Township, who requested the hearing. “I think having the hearing here demonstrates, in my judgment, that we’re doing all we can to ensure that our laws and regulations are appropriate and that if we need to make changes,” the legislature is ready to do so.

She said she hopes to get answers to questions she often hears from constituents, including potential downsides to drilling and whether current regulations are enough to curtail them.

According to several of the speakers, Pennsylvania might have a lot of ground to make up before it’s running even with the industry. “I just don’t understand the state’s set-up. Why wouldn’t that be a requirement to disclose how well the wells (are performing)?” asked John Baen, a University of North Texas professor and real-estate expert who has 250 wells on his property in the Barnett Shale. “If it’s all proprietary, then how do we know what the true wealth is?”

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

Copyright: Times Leader

Companies now are focusing on drilling land that’s already been leased, industry experts say.

The natural-gas windfall seems to have dried up – at least for now.

Commodity price declines, disappearing credit worthiness and companies transitioning to produce gas from the lands they’ve leased have combined to limit lease bids and reduce bonus payment offers.

“Not only are we noticing it, there’s no argument that’s not happening,” said Jack Sordoni, who owns the Wilkes-Barre-based fossil-fuel drilling company Homeland Energy Ventures LLC and is negotiating leases for local landowners.

Though he’s recently inked leases in Fairmount Township with $2,850 per acre up-front bonuses, he said he’s also had this week similar offers in the same area fall to $2,000 per acre. Other sources are reporting offers dropping back to pre-summer levels of several hundred dollars.

Part of the cause for the change, he noted, is that some large companies have dropped out of the leasing competition because prices have fallen and the credit crisis has hampered their ability to take on short-term debt.

“I would suspect, not being an economist, that they would have pretty far reaching” effects, he said. “The ones who are signing aren’t competing with as many players, so the prices aren’t going to be as high.”

The companies say the clock is ticking on beginning work on existing leases, so they’re focusing on filling out the gaps in the territories they’ve already locked up.

“We have moved from the lease acquisition phase to the development phase,” Chesapeake Energy spokesman Matt Sheppard wrote in an e-mail. “We are leasing strategically to support our existing leasehold.”

Sheppard said that for Chief Oil & Gas and many companies “it is more of a shift to moving dollars into drilling and development” instead of continuing to build leasehold in unproven areas.

Chief Oil & Gas spokeswoman Kristi Gittins wrote in an e-mail: “A lot of acreage has been leased. As drilling begins and areas prove out, leasing should pick up.”

With drilling and production increasing, natural gas prices have dropped about 50 percent in the past half year, he noted.

“This was a gold rush at the beginning. It was a frantic pace. Companies were scrambling. The pullback of the commodity prices has certainly led to a slowdown,” he said.

But there are some positive indications for unsigned properties. For example, companies have already shown indications of ramping up production in the region.

Gittins said Chief will soon have four rigs in the region, including one made specially for maneuvering in the hilly Appalachian region, and two more by early 2009.

With drilling and production increasing, natural gas prices have dropped about 50 percent in the past half year.

Copyright: Times Leader

DEP ordered partial shutdown of 2 drilling sites for not having permits.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

HARRISBURG – Reacting to regulation violations and some activities by companies exploring for natural gas in the Marcellus Shale, state environmental regulators on Friday held an unprecedented summit with gas drillers to define expectations for water and land protection.

The meeting came about a week after regulators took steps to rein in the burgeoning exploration industry and its increasing demand for water. The Susquehanna River Basin Commission warned drillers they needed water-withdrawal permits, and the state Department of Environmental Protection ordered the partial shutdown of two drilling sites for not having such permits.

Citing Pennsylvania’s coal and oil past and current commitment to renewable energies, DEP Secretary Kathleen McGinty assured the state “likes energy” and is “not allergic” to the effort required to extract it, but cautioned that her department will expend as much energy to protect the environment and natural resources.

“This is not about sending a signal that we don’t want to be a partner,” she said. “It’s just about some good rules for the road.”

Experts have known about the Marcellus Shale layer, which runs from upstate New York into Virginia and touches northern Luzerne County, for decades. They believe it contains enough recoverable gas to supply America’s natural gas demand for two years. However, technology has only recently advanced enough to tap the shale, which lies as much as 8,000 feet below the surface.

J. Scott Roberts, DEP deputy secretary in the Office of Mineral Resources Management, announced additions to the agency’s usual drilling permit specifically for Marcellus Shale that include detailed estimates of water use.

Paul Swartz, the river basin commission’s executive director, said companies need to make timely applications and factor the permitting process into their drilling timelines. Two permits were approved at the commission’s meeting on Thursday, he said, but another 84 – about a year’s worth of work – still await approval. Though there is a water-use threshold for requiring a permit, he said any work in the Marcellus would exceed that threshold and require a permit.

Exploration in the Marcellus is unlike gas exploration elsewhere in the state because deposits are vastly deeper, mostly unproven and necessary infrastructure, such as pipelines and water-treatment facilities, does not exist.

As energy prices continue to rise, drilling in the deep shale has become more enticing. DEP issued a record number of permits in 2004, 2005 and 2006. The rise leveled off in 2007 with 7,241 permits. So far in 2008, 2,510 have been issued.

Copyright: Times Leader