Posts Tagged ‘Gas Leases’

By Laura Legere (Staff Writer)
Published: August 13, 2010

There are no unleased acres left in Pennsylvania’s state forests where Marcellus Shale natural gas drilling sites, pipelines and access roads could be built without damaging environmentally sensitive areas, according to a new analysis by the Department of Conservation and Natural Resources.

Nearly 139,000 acres of state forest have been leased for gas drilling since 2008 and money from those lucrative leases – a total of $354 million – has been used to help balance the last two state budgets.

But DCNR Secretary John Quigley said the era of leasing large parcels of state forests for gas drilling is over.

“We may do some little stuff here and there,” he said, “but in terms of large-scale leasing, we’re done.”

The department’s findings, demonstrated in a series of overlain maps on DCNR’s website, show the forests in northcentral Pennsylvania above the gas-rich Marcellus Shale crowded by leased land, parcels where the state does not own the mineral rights and places where development must be restricted.

Of the 1.5 million acres of state forest underlain by the shale, 700,000 acres have already been leased or the mineral rights under them are controlled by an owner other than the state.

An additional 702,500 acres are in ecologically sensitive areas – places with protected species, forested buffers, old growth or steep slopes. Another 27,500 acres are designated as primitive and remote lands, 49,600 acres were identified through a forest conservation analysis as priority conservation lands, and the last 20,400 acres are so entwined with the other sensitive areas that they cannot be developed without damaging them.

The department began to study the limits of the state forest land that can safely be leased to gas drillers as it developed a series of Marcellus gas leases in 2008 and January and May 2010.

Gas drilling has taken place on state forest land for over six decades, and mineral extraction is one of the forest’s designated uses, along with sustainable timber harvesting, recreation and conservation. But, Mr. Quigley said, “There are limits to how much you can develop the resource and maintain balance. And I think we’re there.”

There are currently about 10 producing Marcellus Shale gas wells in the state forest. The department expects there will be about 6,000 wells on 1,000 separate drilling pads when the resource is fully developed in 15 or 20 years.

The secretary said the prime consideration for any future leasing, “if we do any at all,” will be that drilling or associated activities not disturb the forest’s surface – a possibility with horizontal drilling technology that enables drillers to access the mile-deep shale from adjacent properties.

The impact of the DCNR’s findings is unclear.

Gov. Ed Rendell said earlier this year that no additional forest land will be offered for lease during his tenure, which ends in January, but the department’s findings have no legal bearing on the next administration’s ability to change its forest policy.

A bipartisan group of lawmakers in the House passed a three-year moratorium on new leasing of state forest land for gas drilling in May, but the measure has not been taken up by the Republican-led Senate.

Patrick Henderson, a spokesman for Sen. Mary Jo White, R-21, Franklin, chairwoman of the Senate Environmental Resources and Energy Committee, said he does not sense “at all” an upswell of support among the members of the Senate to pass it.

Mr. Henderson said the department’s findings “carry some weight,” but he said the claim that there is no forest land left for surface gas development is subjective.

“I think different people can conclude if there may be some tracts of land out of 1.5 million that lie within the fairway to lease,” he said.

A $120 million lease deal DCNR reached with Anadarko Petroleum Corp. in May that is expected to have minimal impact on the state forest’s surface could not have been possible if the House’s moratorium bill had been law, he said.

“There’s something to be said for having a fresh set of eyes under the new administration take a look at it and draw their own conclusions.”

Mr. Quigley was optimistic that if future decisions about forest leasing are left to DCNR, his department’s findings will stand.

“The science tells us that we’ve reached the limit,” he said. “The question becomes whether we will face another occasion when economics looms larger.”

ONLINE http://bit.ly/DCNRmaps

Contact the writer: llegere@timesshamrock.com

View article here.

Copyright:  The Scranton Times

By Steve Mocarsky smocarsky@timesleader.com
Staff Writer

 LEHMAN TWP. – Back Mountain residents and local legislators knew parcels of land leased to natural gas companies for exploration were close to two major water sources – the Huntsville and Ceasetown reservoirs, but some had no idea just how close.

There is at least one parcel of leased land on the shoreline of the Huntsville Reservoir, and another parcel just a few hundred feet from the shoreline, The Times Leader learned on Monday.

The discovery was made by title searcher Eric Gustitus, of Exeter, and verified by the newspaper through a Luzerne County property records check.

“I was doing a title search on property next to Penn State Lehman and I came across a gas lease on land close to the reservoir. I was shocked,” Gustitus said, explaining that he heard local activists expressing concerns about potential gas well sites being within a mile or two of water sources.

Gustitus located a 3.72-acre property on the shoreline of the reservoir owned by Paul and Janet Siegel, and an adjacent 10.88-acre property to the west owned by their son, Christopher Siegel, and his wife, Maureen.

“Oh my God, am I concerned,” said state Rep. Phyllis Mundy, D-Kingston, when told of the proximity of the leased land to the reservoir.

“I’m very concerned about the potential for drilling so close to the reservoir. If you’ve been following the news about Clearfield County and how frack water spewed from the well for 16 hours, you can see why potential for contamination of our water supply is of grave concern to me. And I know my constituents are concerned,” Mundy said.

A blowout at a natural-gas well in Penfield shot explosive gas and polluted water as high as 75 feet into the air last week before crews were able to tame it more than half a day later.

EnCana Oil & Gas plans to drill two exploratory wells this summer – one next month in Fairmount Township and another in Lake Township. After drilling an initial vertical well on a site, the company will drill horizontally, using a process called hydraulic fracturing (fracking) to release natural gas from the thick layer of shale about a mile beneath the earth’s surface.

Mundy is a co-sponsor of legislation that would create a 2,500-foot buffer around water sources such as the reservoirs to protect them from possible contamination from gas drilling-related activities.

The Huntsville and Ceasetown reservoirs serve as a water supply for Pennsylvania American Water Co., which serves many of Mundy’s constituents.

Mundy said Pennsylvania American President Kathy Pape had expressed concerns to her about water contamination.

Pape said on Monday she is working with Mundy to prepare testimony for the state Public Utility Commission on Marcellus Shale drilling.

Harveys Lake resident Michelle Boice, a member of the Gas Drilling Awareness Coalition and a commentator on environmental issues related to gas drilling at local meetings, said allowing any kind of gas drilling operations so close to the reservoir is “beyond any kind of reasoning., and it goes to show there are no rules or protections in place for the people.”

Dr. Tom Jiunta, a founding member of the coalition, said it’s “insane how close they are with these leases” to water sources.

Paul Siegel said he’s just as concerned as his neighbors about the potential for reservoir contamination, and that’s why there’s a protective clause in his lease with EnCana. “We have the right not to let them on our land, and we wouldn’t do that because we want to live here,” he said.

Siegel said he agreed to lease the land because he got the impression that everyone around him was signing gas leases.

“When everyone around you is signing, it gets kind of like a mad rush. So, if they’re going to be drilling next to us, and they’re going to be down there anyway, we said we don’t mind if they go under us,” Siegel said.

Christopher and Maureen Siegel could not be reached for comment. Neither could EnCana spokeswoman Wendy Wiedenbeck.

To view this article, click here.

Copyright: The Times Leader

Many landowners are being approached with offers to lease their land. The size of the signing bonuses that have been paid in transactions between informed buyers and informed sellers is directly related to two factors: 1) the level of uncertainty in the mind of the buyer, and 2) the number of other buyers competing to make the purchase. These factors have changed significantly in a very short time.

As recently as 2005 there was very little interest in leasing properties for Marcellus Shale gas production. The Marcellus was not considered to be an important gas resource and a technology for tapping it had not been demonstrated. At that time the level of uncertainty in the minds of the buyers was very high and the signing bonuses were a few dollars per acre.

When the potential of the Marcellus was first suspected in 2006 a small number of speculators began leasing land – paying risky signing bonuses that were sometimes as high as $100 per acre. In late 2007 signing bonuses of a few hundred dollars per acre were common. Then, as the technology was demonstrated and publicized signing bonuses began to rise rapidly. By early 2008 several wells with strong production rates were drilled, numerous investors began leasing and the signing bonuses rose from a few hundred dollars per acre up to over $2000 per acre for the most desirable properties.

If the results of current and future drilling activity do not match the expectations of companies paying for leases the amounts that they are willing to pay could drop rapidly.

Copyright: Geology.com

CAMILLE FIOTI Times Leader Correspondent

LEHMAN TWP. – Chris Miller of Jackson Road voiced concerns Monday about the effects of possible gas drilling in the township.

“I am not opposed to gas drilling,” he said told the township supervisors at their meeting. “I am concerned and vigilant about what gas drilling can do to our special community if we do not properly plan.”

He commended the board for passing the Growing Greener ordinance last year that was adopted to help preserve natural, open space in the township.

“Many of us who live here do so because this is a wonderful community,” Miller said. “Our kids can breathe fresh air. The water is clean. There is plenty of forest to hike and hunt in and streams to fish in,” he added.

Supervisor Ray Iwanoski said the board is also concerned; however, the state, not the township, has control over drilling. Drilling hasn’t started in the township, but a number of leases have been issued, Supervisor Dave Sutton said.

“I’m also not opposed to drilling,” Sutton said. “But the township’s initial concern is damage to the roads.” Large trucks hauling machinery and polluted water used in hydraulic fracturing – the type of drilling used to stimulate the release of natural gas from the Marcellus Shale – will take a toll on the township’s roads, Sutton added.

Iwanoski said the board plans to meet with representatives from Whit Mar, the Denver-based firm that has a hold on the area’s gas leases.

In another matter, Sutton addressed complaints made by several Oak Drive residents at last month’s meeting regarding the condition of their road. Sutton said the residents complained that their road is riddled with potholes and is dangerous to drive on.

“There was a lot of exaggeration at the last meeting,” he said. He said he tested the road on his way home from that meeting. “The road is very safe. It was very easy to drive.”

Iwanoski added the road didn’t qualify for a state grant to pave it. He said the road crew patched the potholes the day after the complaints were made.

Copyright: Times Leader

Property owners hear about some of the financial complications involved with gas drilling agreements.

Although planning for what to do with gas-lease profits is a problem most people wouldn’t mind having, landowners likely aren’t eager to add paperwork to the already document-laden gas-leasing process.

Experts, however, say protecting the wealth is the same as accumulating it in the first place.

“I’ve seen some horror stories, and if it means going to an attorney and paying a few dollars, it’s worth it,” said Ronald Honeywell, a trust officer with Luzerne Bank who spoke at a seminar on the financial implications of gas leases on Monday evening at Lake-Lehman Junior-Senior High School.

Past seminars on leasing have packed the school’s auditorium, but Monday’s seminar on taxes and investing attracted perhaps 50 people. Presenters admitted that financial topics aren’t often looked forward to but are important nonetheless.

Of particular interest were leasing’s tax implications, such as drilling’s effect on county Clean and Green tax abatement programs. Michelle O’Brien, an attorney with Rosenn, Jenkins & Greenwald in Wilkes-Barre, said drilling would roll back seven years of abatements.

“It’s only fair that the oil company pays that price because they’re the ones kicking you out of Clean and Green,” she said.

However, she pointed out that the company’s payment would likely be a reimbursement, meaning the landowner should be prepared to pay the penalty.

“It sounds like a simple concept, but the money could be a lot of money,” she said, perhaps up to $100,000.

O’Brien also pointed out leases allow landowners to retain control over the location of pipelines and other infrastructure because the property’s marketability could drop depending on where such things are placed.

Even with legal exemption clauses, landowners should retain liability insurance, she said, to cover situations not directly caused by the drilling processes, such as all-terrain vehicles crashes or youths getting hurt on the equipment.

Robert Lawrence, a certified public accountant, explained that the royalties and sign-on bonuses are passive income, similar to rental income, which means they can push landowners into higher tax brackets and impact Social Security or Medicare payments. He suggested that people receiving royalties discuss paying installments on the estimated taxes.

Passing the wealth along creates its own pitfalls, noted Lee Piatt, also with Rosenn, Jenkins & Greenwald. Financial planning and distribution of the proceeds through family corporations or other outlets can avoid some of that, he said.

While it can cause headaches, the increased tax burden can also make some investments more enticing, said Arthur Daube, an investment adviser with Park Avenue Securities. Though their return is low, municipal bonds are tax-free by law, he said, so they can act as havens for profits.

O’Brien also pointed out leases allow landowners to retain control over the location of pipelines and other infrastructure.

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

Offer extended to interested landowners in Ross and Fairmount townships.

ROSS TWP. – For a limited time, landowners looking for a natural-gas drilling lease have a commitment-free offer to get a low-cost lease negotiator.

The Columbia County Landowners Coalition has a secured a consultant from Texas to negotiate a deal, but he’s starting soon and only doing it once.

The consultant, who has experience with fossil-fuel wells in the Midwest, is charging $1 per acre and expects to begin negotiations at $2,900 per acre for sign-on bonuses and extraction royalties of 18.75 percent, the executive committee of the Southwest Ross Township Property Group announced at a meeting on Tuesday evening.

Those figures exceed the usual for contracts inked in this region.

The Ross group, led by the committee of eight volunteers actively researching the situation, has been holding meetings to explain issues regarding gas leases and sign up landowners within its borders. It’s focusing on a roughly 10,000-acre region and hopes to amass a no-commitment membership of at least 4,000 acres within there.

The Columbia County offer is extended to interested landowners in the vicinity, including the Ross Township group and one in Fairmount Township. Landowners can sign up at the coalition’s Web site, but they must act soon.

According to the Ross group, the coalition expects to begin negotiating in a matter of weeks and hopes to have a contract to sign by the fall. And the consultant, who is doing a favor for a friend, plans to return to retirement after completing the deal.

If it sounds too good to be true, the suspicion might be warranted. The Ross committee acknowledged that the timetable is more rushed than they’d prefer, but they argue that there’s no commitment and people can opt out if they dislike the negotiated deal.

According to the committee, the Columbia County group is moving quickly because sign-on bonuses are considered regular income, and the group fears the changing political climate next year will mean tax increases for upper tax brackets.

What’s next?

The Southwest Ross Township Property Group is holding its next informational meeting at 7 p.m. July 29 at the Sweet Valley fire hall on Main Road.

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

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

Experts say leases are in-depth and a lawyer’s assistance is recommended.

By Sheena Delazio sdelazio@timesleader.com
Staff Writer

LEHMAN TWP.— The Penn State Cooperative Extension of Luzerne County and the Luzerne Conservation District want landowners to know what they are getting into before they sign a natural gas lease for their property.

The two organizations will host “Understanding and Negotiating Natural Gas Leases,” as part of a two-day informational discussion. The first session, held on Monday, was attended by more than 70 local landowners.

“It’s a hot topic right now,” said Tanya Dierolf, a conservation coordinator for the conservation district. “The price per acre has increased at a phenomenal rate.”

Typically, leasing companies offer property owners one-eighth of the money made on gas or oil extracted from beneath their properties. Depending on the company, owners can receive hundreds of dollars up front.

“(On Monday) presenters talked about the impact it could have on the land (if someone signed a lease), and there is potential there to make money, but we’re trying to present the facts,” Dierolf said. “These (leases) are very technical, and we highly recommend (landowners) consult an attorney before they make a decision.”

For example, in June, the Pennsylvania Mineral Group based in Port Lavaca, Texas, made up to 700 offers in Luzerne County to purchase gas rights at $300 an acre. Offers were based on geological surveys that pinpoint locations that may contain natural gas or oil.

The Pennsylvania Mineral Group did not return phone calls.

“These lease agreements are so in depth that landowners don’t understand the legality,” said Donna Grey, a Penn State Cooperative Extension educator. “We’re trying to explain what the landowner can expect to occur on their property so they can have an understanding, both visual and written.”

For next week’s session, Penn State Extension educators will be on hand, as well as a geologist and attorney, to talk about understanding gas leases, negotiating a lease, the economic impact of signing a lease and development of the Marcellus shale within the Earth.

Grey said landowners who attend will be able to make better decisions regarding their land. “This could be a good thing or a bad thing (for the landowner),” she said.

“It’s really confusing, and landowners need to use a consultant or attorney to help them. They can negotiate (if they decide to sign). And if they aren’t comfortable, they don’t have to settle on one gas company,” Grey said. “There is more than one company. They are just like any other sales person, they are out there to sell their product.”

If you go…
What: Understanding and Negotiating Natural Gas Leases

When: 7 p.m. Monday

Where: Technology Center, Penn State Wilkes-Barre Campus, Lehman Township

To register: Call 570-825-1701 or 570-674-7991. There is a $15 registration fee per person.

Copyright: Times Leader