Posts Tagged ‘financial advisor’

Chesapeake Energy explains protections it practices during drilling for natural gas.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

PLAINS TWP. – As negative issues arise related to natural-gas drilling in the Marcellus Shale, at least one company is being careful to keep residents informed about the industry’s benefits and distance itself from concerns.

Speaking on Thursday at the “Executive Management Breakfast Series” put on by Penn State Wilkes-Barre, a spokesman for Chesapeake Energy detailed the environmental protections his company uses when drilling and outlined the positive economic effect the industry has had in Pennsylvania.

Chesapeake has paid out $700 million to landowners since 2008, along with $100 million to contractors in the state and $500,000 to community projects in 2009, according to Brian Grove, the director of corporate development for the company’s eastern division.

But the growth – a plan for 200 more wells in 2010 – isn’t at the expense of precautions, he said. Wells receive five layers of protection from ground water, he said, and “all of the chemicals (used in the hydraulic fracturing process) are stuff you will find in your home.”

The statement comes weeks after driller Cabot Oil and Gas was fined by the state Department of Environmental Protection for spilling fluids that contaminated a nearby wetland and a day after the department announced another fine against Cabot and ordered that alternative water supplies be provided to Susquehanna County residents whose water wells have been contaminated with methane.

“Certainly, when an operation isn’t meeting the regulations laid out by the state, it doesn’t reflect well on the industry,” Grove acknowledged, adding that Chesapeake is striving to remain free of such image-tarnishing incidents.

At least one of Chesapeake’s operating practices impressed Mary Felley, the executive director at Countryside Conservancy in La Plume, for its environmental protection beyond state regulations. Drillers must collect water contaminated by drilling activities, but they’re only required to store it in open-air pits. When Grove noted that Chesapeake stores all of it in closed containers, Felley complimented the company on its additional protections.

Grove also assured members of the Wyoming County Landowners Group whose land rights are confirmed will be receiving the full up-front payments the group negotiated, which was a particular concern for Marisa Litwinsky, a financial advisor with Merrill Lynch. Group members and others who have recently signed with Chesapeake have worried that the driller might back out on paying the balance of those deals.

“We’re committed to” the land group, Grove assured. “Anyone who’s got a good title, they’re going to have a lease.”

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

Copyright: Times Leader

Topics like reporting leasing income, transferring leases to beneficiaries to be covered.

The temptation to just sign could seem irresistible. With a few strokes of the pen, some people in the region are being offered the chance to completely change their lives with natural gas leases.

But first, they’re warned, make peace with the fact that the next person will get more. Check the maps, they’re told, check the deed, hire a lawyer, test the water. How much environmental damage is acceptable? How about hassles to daily life?

For those not involved, think Beverly Hillbillies, minus that improbable shot, and then exchange the endearing high jinks for hours of tedious title searching, legal work and stressful decisions with lifelong implications.

So who could blame anyone for simply signing and hiding behind the wads of cash? Well, their children, for one. Because with the great benefits of gas royalties come the great responsibilities of taxation and profit allocation, and, if they’re ignored, the great headaches of the judicial system and familial infighting.

“People are just seeing the (money) as a way to pay taxes … and not thinking about having to report it to the IRS and the tax implications that could have on them … or thinking about general financial planning or investing,” wrote Donna Skog Grey in an e-mail.

Grey, who works for the Penn State Cooperative Extension in Luzerne County, says the extension has been fielding questions on gas leases, environmental issues and lessee rights. What to do with the money, however, hasn’t come up often, she noted, which is why the extension is sponsoring workshops on what to do after the lease is signed but before the money rolls in.

One is planned for Lake-Lehman Junior/Senior High School on Aug. 25.

“There may be some strategies available to reduce the income tax,” said Dale Tice, an attorney with Greevy & Associates, a Williamsport law firm consulting on gas leases. “That’s something they would want to work out with their accountant or financial advisor prior to receiving the payment.”

The workshop will cover various topics, including how to report leasing income – the cash bonuses are just like regular income – transferring leases to beneficiaries and investment options.

“Certainly the cash-bonus payment is an issue,” Tice said. “It could push somebody up into a higher tax bracket. … You’re looking at a large potential tax hit, and without using the strategies that are available, you’ve got issues (in the event of) divorce, creditors.”

To add to confusion, there are health-care implications with elderly lessees who are currently eligible for Medicare or Medicaid, he said.

He noted some families are creating limited-liability companies to distribute the proceeds, and that family limited partnerships can make dividing up ownership of the lease similar to issuing stock.

“Really, the issue here is providing governance, keeping the parents in control of the resource while they’re alive, but at the same time providing for an orderly and easy shift of equity to the next generation,” Tice said. “I don’t think that you have to have it necessarily worked out before you receive your cash-bonus payment, but certainly there’s no disadvantage to thinking about these issues earlier rather than later.”

If you go

A natural gas-leasing workshop entitled “Managing Natural Gas Lease and Royalty Income” is scheduled for 7 p.m. to 9:30 p.m. Monday, Aug. 25 at the Lake-Lehman Junior/Senior High School. The cost is $10 per person. To make reservations, call the Penn State Cooperative Extension at 1-888-825-1701.

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

Copyright: Times Leader