Posts Tagged ‘Kentucky’

Intent is to have inspectors based closer to local gas drilling activity.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

For some time, local legislators and environmentalists have complained that local oversight of natural-gas drilling is too difficult because the closest inspectors are in Williamsport.

With the industry preparing to ramp up activities in Susquehanna and Wayne counties, the state Department of Environmental Protection addressed that complaint on Wednesday by announcing the opening of an Oil and Gas Management office in Scranton.

“Our communities need the economic boost that gas drilling will provide, but we simply cannot afford to have state government shortchange oversight,” said state Sen. Lisa Baker, R-Lehman Township, in a news release.

She had asked Gov. Ed Rendell to open an office closer to local drilling activity, the release noted, because “given the increase in drilling activity expected to take place in the region, and the potential environmental consequences of mistakes, long-distance oversight was not an acceptable answer.”

The site hasn’t been finalized, but it will be within the city, according to DEP spokesman Tom Rathbun, and will house 10 employees who have yet to be hired. Most of those will be “field personnel,” Rathbun said, meaning “they’ll be handling inspection and compliance.”

No date has been set for the office’s opening, but Rathbun assured it would be “as soon as possible.”

“We’re anticipating continued growth in Wayne and Susquehanna counties, according to what the industry is reporting, so we’re responding to that,” he said. “That’s based on the industry forecasts where they’re doing next year, what they expect to do.”

Funding for the employees and regional office will be paid for through increased permitting fees the industry is paying to drill in the Marcellus shale, “which was the original intent behind increasing the fees: to make the program pay for itself,” Rathbun said.

The shale is a rock formation a mile underground stretching from New York to Kentucky and is estimated to store enough gas to supply the nation’s current consumption for two decades.

The employees will be part of 68 new DEP hires that Rendell announced last week to handle increased gas drilling, Rathbun said.

Copyright: Times Leader

Property owners claim in lawsuit agent offered lower royalty than allowed by law.

MARC LEVY Associated Press Writer

HARRISBURG — Scores of people who own land above a potentially lucrative natural gas reservoir are seeking to void the drilling leases they signed and accused a land agent of guaranteeing a lower royalty than the amount allowed by state law.

The property owners filed a lawsuit in federal court in Williamsport last week against The Keeton Group LLC, of Lexington, Ky.

The lawsuit stems from a rush of activity by exploration companies to capitalize on the largely untapped Marcellus Shale gas reservoir while natural gas prices are high. Property owners from West Virginia to New York have complained of aggressive “landmen” pushing them to sign leases that allow an exploration company to drill down to the Marcellus Shale, a layer of thick black rock that holds a vast reservoir of gas.

The law cited by the plaintiffs guarantees a property owner at least one-eighth of the royalties from the recovery of oil and gas on their land. However, the suit said the leases violate state law because they give the exploration company the right to subtract taxes, assessments and adjustments on production from the 12.5 percent royalty.

The suit, filed Thursday, said the approximately 130 plaintiffs own more than 18,000 acres in Sullivan and Lycoming counties in northern Pennsylvania. The contracts were signed with Keeton between April 2005 and March 2006, the suit said.

A telephone message left Tuesday with The Keeton Group was not immediately returned. On an outdated version of its Web site, Keeton touts its record as an early arrival on the Marcellus Shale.

“Our group was among the first to acquire lease rights for the current Marcellus Shale drilling activities — not only in Pennsylvania but also in 7 other states under which this vast geological formation lies,” the Keeton site said.

The gas reservoir beneath the Marcellus Shale was long known to exist, but only recently has drilling technology improved enough to cost-effectively tap into it. According to state officials, drilling activity on the formation is taking place at about 275 well sites, and less than 20 sites are producing gas.

To date, exploration companies have spent about $2 billion on leasing land, performing seismic studies and other activities in pursuit of Marcellus Shale gas in Pennsylvania, according to Stephen Rhoads, the president of the Pennsylvania Oil and Gas Association.

Companies as large as ExxonMobil Corp. have shown interest in Pennsylvania, which is one of four states that sit atop 54,000 square miles that analysts say hold the best exploration prospects.

Copyright: Times Leader

Expert says leases signed for $18,000 per acre in productive areas of Texas.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

TUNKHANNOCK – Around January, Cal Otten’s parents signed a lease at $125 per acre to allow natural-gas exploration on their Forkston Township property in Wyoming County. Had they waited until now, they probably could have received $2,500 per acre.

That’s what Otten was offered a week ago.

“I thought $125 was a lot, actually, at the time,” said Otten, who owns 140 acres near his parents’ property.

Do a little math and you’ll see Otten’s parents made about $34,375 on their 275 acres. Not a bad haul for anyone, much less a couple in their golden years.

Cal Otten is holding out, even though he stood to gain $350,000. He wants a higher stake in the royalties if gas is ever extracted from his land, which means, yes, companies are giving away money on the speculation that they might find gas.

But that speculation is grounded in science, testing and history. Experts believe the thick Marcellus Shale that stretches deep underground from Kentucky to New York, including parts of Luzerne County, has the potential to produce as much natural gas as similar shale deposits in northern Texas.

Kenneth L. Balliet, a forestry and business management educator with the Penn State Cooperative Extension, recently took a trip to Fort Worth to see the economic impacts of those deposits. He said leases are being signed for $18,000 per acre in areas where production has proven strong.

Though there are only about 20 wells in Pennsylvania so far, Balliet expects local production to eventually rival Texas’ Barnett Shale. He said a gas company confided it plans to spend $1 billion this year in leasing agreements in Pennsylvania.

The Marcellus deposit is probably about four times as big as the Texas shale, he said, and a Penn State geologist has estimated that if just a tenth of the gas is recovered, it could fulfill America’s natural gas demand for two years.

“We’re talking lots of changes going on in the communities in terms of jobs: welders, pipe fitters, mechanics, construction,” he said.

Rod McGuirk, a Franklin Township landowner, believes the rush hasn’t yet hit Luzerne County, but it’s coming.

“A lot’s going to happen in the next few months if this keeps going as it’s going. We’re just in the forefront of this,” he said.

He received an offer of $300 per acre on his 56 acres about eight months ago, but hasn’t received another one since. He’s used that time to attend information meetings around Towanda so that he’s savvier when the offers start increasing rapidly.

“We’re where they were eight or nine months ago,” he said. “We want to do this on our terms. We don’t want an environmental disaster in 10 years.”

He’s waiting for a certain offer on his land, but wants to cash in before companies start drilling too much.

“It’s a double-edged sword,” he said. “All they have to do is drill three dry wells, and you don’t get squat.”

Matthew Golden, a West Pittston lawyer who’s offered to negotiate for some Franklin Township landowners, said the trick is straddling the line between getting top dollar and retaining enough rights to protect the land.

“That’s the $10,000 question: When’s the right time to sign and at what price? There are more variables than just the price,” he said, such as lease length, royalties, retaining the right to approve where wells go and securing separate payments for pipeline rights of way.

He suggested landowners have a lawyer look over proposed contracts.

“The standard company lease without any changes to it is bad. It gives away basically all the rights. They can pretty much put a well wherever they want. They’re limited to the barebones the state will allow, which is a lot. Pennsylvania is a pretty pro-drilling state,” he said.

But if sited correctly, Balliet said, wells can be environmentally benign.

“It just takes a little bit of planning,” he said. “Does that mean nothing can happen? No, that’s not true. It can and sometimes it does.”

He recommended landowners get their groundwater tested for oil and gas contaminants now to create a benchmark. Then, they have “something to stand on” if there is a problem, he said.

In the end, landowners must choose a number to accept and make peace with the decision.

“You have to do it with the knowledge that three months from now, the price could be 10 percent of what it is now or 1,000 percent of what it is now,” Golden said.

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

Copyright: Times Leader