Posts Tagged ‘Exco Resources’

by Laura Legere (staff writer)
Published: June 20, 2010

One natural gas well has been drilled into the Marcellus Shale in Lackawanna County, but much more development is on the county’s doorstep.

Already more than an eighth of the county’s land has been leased to companies planning to drill in the Marcellus Shale, according to deeds recorded with the county.

The total land leased – about 38,000 acres – amounts to an area roughly twice the size of Scranton.

Those leases carry a soft deadline for drilling: Many of them have a primary term of five or seven years, which means the companies have to make some progress to develop the gas within that time or renegotiate to extend the agreement and risk losing the lease to a competitor.

Because the vast majority of the leases in the county – 816 of them – were recorded in 2008, the incentive for developing the gas is approaching.

The land rush has touched a vast area of the county. Land in 20 of Lackawanna’s 40 municipalities has been leased, with the largest concentration of leases in northern municipalities, including Scott, Benton and Greenfield townships, as well as areas of the Abingtons.

Many of the county’s most prominent farmers, including the Manning, Eckel, Roba and Pallman families, have signed leases.

Although much of the land has been leased outside of the population centers along the Lackawanna Valley, leased parcels are not strictly on farms or in rural areas.

Baptist Bible College leased 114 acres on its South Abington Twp. campus.

The Abington Hill Cemetery Association leased 120 acres in South Abington along the Morgan Highway.

Leases have also been agreed to on land near residential areas. For example, 38 acres have been leased along the 900 and 1000 blocks of Fairview Road in South Abington.

Property owners with leases include private individuals, but also churches, golf courses, businesses and community associations. The Greenfield Township Sewer Authority leased 7.3 acres; the Fleetville Volunteer Fire Company leased 65 acres in Benton.

The Newton Lake Association and the Associates at Chapman Lake, two community associations that own their namesake lakes and the area around them, both signed leases.

Religious organizations have also signed leases, including the Harmony Heart church camp in Scott, a 59-acre parcel in Scott owned by Parker Hill Community Church, the Evangelical Free Bible Church in North Abington Twp., and Community Bible Church in Greenfield.

Three national energy companies, Oklahoma-based Chesapeake Appalachia, Texas-based Exco Resources, and Texas-based Southwestern Energy, hold nearly all of the leases.

The amount of Lackawanna County land leased for gas development surprised even people who have followed the subject closely for years.

Lee Jamison, a leader of the multi-municipal Abington Council of Governments, which has hosted educational events and speakers regarding Marcellus Shale drilling since 2008, did not know the extent of the leasing or its reach to areas outside of the rural northwest of the county.

He said despite educational events and active gas drilling in nearby communities, Lackawanna County municipalities have to do more to follow changing legislation and precedent-setting court cases to prepare for the coming development.

“I still think there’s quite a lack of preparedness on the part of the local municipal officials,” he said. “Often times you get conflicting reports and confusing stories.”

Mr. Jamison, who recently lost in the Republican primary race for state representative in the 114th House District, made Marcellus Shale a central part of his platform.

“Over 90 percent of the people I’ve spoken to are in favor of developing the Marcellus resource,” he said, “but they want it done correctly. With that caveat.”

Mary Felley, the open space coordinator for the Countryside Conservancy and a representative of Dalton in the Scranton-Abingtons Planning Association, said residents and municipal officials are “aware that it’s coming but not quite here.”

“I come to my local borough meetings, and people ask what can we do as a borough to regulate this, and we don’t know,” she said.

Because of unsettled case law regarding what role municipalities can take in regulated drilling, “we’re not getting a whole lot of clear guidance on what we can and cannot do here,” she said. “That’s kind of scary.”

There has also been a dearth of local training specifically targeting municipal officials on preparing for gas development. Even if there were such meetings, “my concern is people may not attend those until there’s a lot more activity in the county,” she said.

“This is the way we’ve evolved apparently: you respond to urgent threats you can see. You don’t respond to slow, impending threats that are over the hill somewhere.”

Contact the writer: llegere@timesshamrock.com

View article here.

Copyright: The Scranton Times

EnCana is currently signing standard leases giving Luzerne County landowners $2,500-per-acre bonuses.

STEVE MOCARSKY smocarsky@timesleader.com

The value of land leases with natural gas drilling companies has been climbing in counties to the north, but whether that happens in Luzerne County will depend on the results of exploratory drilling scheduled to begin this summer.

Natural gas exploration companies are now offering leases in Susquehanna and Bradford counties with up-front per-acre bonuses in the $5,000 to $6,000 range and royalties as high as 20 percent, said Garry Taroli, an attorney with Rosenn Jenkins & Greenwald representing area landowners.

Late last month, natural gas producer Williams Companies bought drilling rights to 42,000 net acres in Susquehanna County from Alta Resources for $501 million, placing the lease value on that land at nearly $12,000 per acre.

So people like Edward Buda, who owns land in Fairmount Township on which the first natural gas well in Luzerne County will be drilled in July, might be feeling some lessor’s remorse, given that they agreed to comparatively paltry up-front bonuses for the first two years of the lease term.

When Buda, 75, of Ross Township and his late brother and sister-in-law were in negotiations with WhitMar Exploration Co. early last year, they, like many others, agreed to bonus payments of $12.50 per acre each year for the first two years of the lease. The bonus increases to $2,500 for the third year.

However, if drilling begins on or under a landowner’s property before an anniversary date of the lease, any bonus payments for subsequent years become null and void and the royalty provision of the lease kicks in. So, if the drilling that is to begin next month on Buda’s property is successful, he likely won’t ever see that $2,500-per-acre bonus but will receive much larger royalty payments.

Since Buda’s lease was negotiated, WhitMar sold most of the company’s interest in the leases to EnCana Oil & Gas (USA) Inc.

EnCana is currently signing standard leases giving Luzerne County landowners $2,500-per-acre bonuses – $1,000 the first year of the lease and $1,500 the second year, according to EnCana’s Group Lead for Land (New Ventures) Kit Akers.

Some landowners who signed the same type of deal with WhitMar as Buda believe they’ve been treated fairly.

Michael Giamber, 57, of Fairmount Township, lives about 2 miles from the Buda drill pad. While the Budas negotiated their lease on their own, Giamber joined a consortium of landowners who negotiated a deal with WhitMar in 2008 for bonuses of $12.50 per acre each year for the first two years of the lease, $2,500 per acre for the third year, and a 20-percent royalty on all gas produced.

“It was in the middle of a recession and leasing had pretty much stopped except in Dimock. We essentially partnered with WhitMar,” Giamber said.

In exchange for landowners accepting the initially small incremental bonus payment arrangement, WhitMar promised to do seismic testing of the leased land and partner with a company that would handle the drilling and secure permits for one to three exploratory wells in the county within two years.

“I signed on not because of the bonus, but because of the 20-percent royalty and because if they did not drill one to three wells after two years, we’d be free agents again,” able to renegotiate for better terms, Giamber said. “Because we were in a recession, what did we have to lose?”

“A lot of older people would rather more up-front money, and I can appreciate their position,” Giamber said.

Jeffrey Nepa, an attorney with Nepa & McGraw in Carbondale and Clifford, believes people who signed leases early for smaller bonuses were either “more desperate and needed money or were misinformed about what the extent of (drilling in the Marcellus Shale) was. Some people have had buyer’s remorse, so to speak, regretful that they signed and wanting to get out,” Nepa said.

Nepa said he’s seen bonus money increase, dip back down, “and now it’s creeping back up again. And it appears that landowners “who held out, so to speak, are the ones that are rewarded with the largest contracts. In the Barnett Shale (in Texas), I’ve heard of property owners getting in excess of $20,000 per acre, and they were the ones who held out.”

Gas companies normally drill in 640-acre blocks of land. So people with a larger tract of land are better off holding out for better lease terms, Nepa said.

On the other hand, those who signed leases earlier are now the ones who will see royalty payments kick in much sooner than anyone else, because they will be the first to have wells drilled, said Robert Schneider, 39, of Fleetville, Lackawanna County.

Schneider joined a landowner consortium that negotiated leases with a $2,100 bonus and an 18-percent royalty in 2008 with Exco Resources, and he’s glad he didn’t hold out for more.

“Two years have gone by and I have three years left. … There’s a risk if you wait,” Schneider said, speculating that implementation of more rigorous and costly government permitting requirements, the establishment of a severance tax or finding insufficient or no gas in his area are all reasons that companies might pull out and stop leasing.

EnCana’s Akers backed up what Giamber and Schneider had to say. “People who leased earlier put themselves in a position to most likely have their land drilled earlier,” she said.

And Akers said, if WhitMar had not been able to secure leases at relatively low cost to the company, exploration in Luzerne County might not have begun as soon as it has.

“Because these people leased early to WhitMar, WhitMar was able to build a large position of leases that allowed for horizontal drilling. That’s what got a company like EnCana interested in coming to Luzerne County. If we had not seen a consolidated lease position, it’s unlikely WhitMar would have gotten a company like EnCana to come in … It was possible that the $12.50 offer was the only offer those people would ever get,” she said.

Akers also believes that the reason landowners in Susquehanna and Bradford counties are being offered much higher bonuses is because hundreds of wells have been drilled there and natural gas extraction has proven successful.

“Luzerne County, on the other hand, is really on the frontier. There’s no way to know if shale within a geographic region will produce any gas or enough gas to make drilling profitable without actually drilling wells. There have been no wells drilled in Luzerne County, so that’s the reason why there’s a difference in lease prices between Luzerne County and other counties,” Akers said.

If wells on Buda’s land and a site in Lake Township don’t produce any gas or at least enough of it to make drilling there worthwhile, land lease values in Luzerne County could drop to zero, Akers said.

If the wells do produce significant amounts of gas, however, competition for drilling rights will definitely heat up, Akers said, and with it the price.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

By Libby A. Nelson (Staff Writer)
Published: May 28, 2010

Families appealed decision

GREENFIELD TWP. – A decision on the fate of the first Marcellus Shale natural-gas well in Lackawanna County will be delayed for up to 45 days, as the township’s zoning board considers arguments over a zoning change that allowed the drilling.

Exco Resources (PA) Inc., a gas exploration company formerly named Exco-North Coast Energy Resources, drilled the well in late September and October. In December, a resident complained to township supervisors that the land where the well was located, on Route 247 adjacent to the Skyline Golf Course, was not zoned to permit gas drilling.

The family that owned the land requested a zoning change from commercial recreational to rural agricultural, which would permit drilling as a conditional use, and Exco agreed to stop work until the question was resolved.

The board of supervisors unanimously approved the zoning change in March. A group of six families opposed to the drilling appealed the decision, arguing in a hearing Thursday night that the change was an example of “spot zoning” and should not be permitted.

Spot zoning occurs when a municipality rezones a small parcel of land to permit uses that are not allowed on similar land in the surrounding area. Greenfield’s zoning law permits drilling in rural agricultural zones, but opponents of the change said that the drilling is at odds with the township’s rural atmosphere.

“In my opinion, it is not a compatible use,” said Marvin Brotter, a planning expert who testified that he believed the ordinance constituted spot zoning. “I would not want that use next to my residence.”

In Susquehanna County, drilling has ruined roads and produced “disturbing” dust and noise, said Victoria Switzer, who was party to a lawsuit over contamination allegedly caused by gas drilling near Dimock.

“It’s a total industrialization of a rural community,” Ms. Switzer said.

About 35 people, including some who testified, attended the appeal. The zoning board has 45 days to issue a written decision.

Contact the writer: lnelson@timesshamrock.com

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Copyright:  The Times-Tribune