Posts Tagged ‘lease’

By Patrick Sweet (Staff Writer)
Published: June 15, 2010

NOXEN – Chief Oil and Gas may begin construction on a natural gas well just a few miles north of the border between Luzerne and Wyoming counties as soon as the second week of July.

Off Route 29 in Noxen, short stakes mark the future location of the drilling pad on Robert Longmore’s 97-acre farm. The state Department of Environmental Protection is currently reviewing the Texas-based gas company’s permit to place and operate a well it filed May 11.

The farm is near properties that are part of the Noxen Area Gas Group, a body of roughly 150 families with a combined 8,500 acres which is in the midst of negotiating a lease with Houston, Texas-based Carrizo Oil and Gas.

Just down the road from Longmore, Noxen group organizer Joel Field verified that the group is in the final stages of negotiation with Carrizo. Field and co-organizer Harry Traver declined further comment due to the sensitivity of the negotiations.

“Until things are settled down, they’d rather not give any statements,” Harry Traver’s wife, Dawn Traver, said Monday.

Longmore, 56, has owned the farm since 1998 and signed a lease with Chief roughly four and a half years ago. The landmen who approached Longmore about the deal, he said, made the three-page lease giving his family $25 per acre with the minimum 12.5 percent royalty sound like a good deal.

“We were kind of taken advantage of four and a half years ago,” Longmore said. “I know people getting $6,000 an acre.”

The lease had almost no provisions protecting Longmore’s farm. At the time, the landmen made it seem unlikely that drilling would ever commence during the terms of his lease, which ends May 15, 2011.

Chief Oil and Gas media contact Ben McCue attempted to reach operations employees for comment Monday afternoon but they were unavailable by press time.

Since Longmore signed, though, he said his experience with the company has been much more positive.

Earlier this year, the Longmores were given the opportunity to amend the lease.

“They proposed some amendments to the lease,” Longmore said, “so we countered with some amendments with some environmental stuff.”

Chief offered to reopen the terms of the lease in order to add protections for the company in anticipation of a Pennsylvania Supreme Court decision that could have invalidated thousands of gas leases where gas companies were deducting production costs from the state minimum royalty.

The opinion on the case was an interpretation of the Pennsylvania’s Minimum Royalty Act which establishes the 12.5 percent royalty requirement for all oil or natural gas recovered from a well but doesn’t stipulate when to calculate the royalty.

The court ultimately decided in favor of the gas companies roughly a week after the Longmores and Chief finalized the revised lease.

The Longmores added amendments that protected ground and surface water, along with the 0.25-mile stretch of Bowmans Creek that runs through the property.

Longmore’s son, Josh Longmore, manages the Luzerne County Conservation District and helped his father amend the lease.

“Unfortunately, they signed a very basic lease that didn’t have some of the protections that the newer leases have,” Josh Longmore said. “Our biggest goal, our biggest hope is that the property maintains its natural beauty, its agricultural purpose.”

The younger Longmore doesn’t have any stake in his parents’ farm, but felt that it was necessary to help. He and his father combed through leases that they found online and pulled out the clauses that fit their needs.

“There was like three or four different categories of amendments,” Longmore said.

Chief accepted 90 percent of their roughly 20 amendments, Longmore said.

The company did draw the line on an amendment that would have prohibited the company from disposing cuttings – the rock equivalent to sawdust – on the pad. The company argued it would be cost-prohibitive to haul it off-site, Longmore said.

“I really got the impression that they weren’t hiding anything from us,” Longmore said. “They were willing to answer every question we had.”

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Copyright: The Citizens Voice

By ANDREW MAYKUTH The Philadelphia Inquirer

The state Department of Conservation and Natural Resources signed a $6.15 million agreement Monday with Chesapeake Energy Corp., giving the company the right to drill the Marcellus Shale under a seven-mile stretch of the Susquehanna River in Bradford County.

Under the lease, which applies to 1,500 acres of river between Towanda and the Wyoming County line, Chesapeake is permitted to access the shale with wells drilled on either side of the river. No well bores will penetrate the river itself.

Horizontal-drilling technology makes drilling for gas beneath the waterway feasible. With wells that reach laterally for thousands of feet, operators can capture gas under a large area from a remote location.

The state Department of Environmental Protection says that under-river gas exploration poses no more risk than any of the 1,400 other wells drilled into the Marcellus formation, which is a mile below the surface. The lease is separate from the state’s offering in January of 32,000 acres of state forests, which generated $128.5 million to help close the state budget gap.

The $6.15 million raised by the Susquehanna River lease will help keep open 24 state parks that had been threatened with closure because of the budget crisis, said Christina Novak, DCNR spokeswoman.

DCNR’s Susquehanna River lease may conjure memories of the 1959 Knox Mine disaster in the Port Griffith section of Jenkins Township, when the Susquehanna broke through a coal mine that was dug just below the river bottom. A dozen miners died in the flood.

Geologists say subsidence is not an issue with gas exploration. The well bores are only a few inches in diameter.

Copyright: Times Leader

Luzerne County property owners hope to have their own deal by year’s end.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Lease signing begins today for members of the Wyoming County Landowners group who have accepted a gas-drilling offer from Chesapeake Energy.

The signings could foreshadow what other local landowners are hoping comes to them soon. The South West Ross Township Property Group and Columbia County Land Owners Coalition confirmed on Friday that they, too, are in talks with Chesapeake.

The Columbia group, which represents roughly 80,000 acres in Columbia, Luzerne, Sullivan and Lycoming counties, hopes to complete a deal before the end of the year, according to an e-mail sent out to its membership.

The Ross Township group, which includes roughly 10,000 acres around Ross Township, is affiliated with the Columbia group, but also making its own discussions with Chesapeake, said Ken Long, a member of the group’s executive committee.

Group leaders expect monetary terms to be similar to the one Chesapeake offered to the Wyoming group: a five-year lease at 20-percent royalties, plus a $5,750-per-acre sign-up bonus. It includes a five-year option Chesapeake could exercise for another $5,750 per acre.

But other recent events with drillers locally could foreshadow what landowner hope to never see. The state Department of Environmental Protection issued a notice of violation to Cabot Oil and Gas Corp. for a gas spill earlier this week and ordered the company to cease hydraulic fracturing in Susquehanna County until it had completed a comprehensive engineering assessment and updated its pollution-prevention plans.

The company is currently drilling seven new wells in the county that will require fracking, which forces water, sand and chemicals into the gas-laden Marcellus Shale to fracture the rock and release the gas.

The company has 21 days to complete the assessment and 14 days to update the plan. Once it’s approved, the company will have 21 days to implement the plan.

The situation is one that landowners like the Wyoming group hope to avert with their in-depth leases. The group has been split alphabetically for this weekend’s signing. Those with surnames beginning with “A” through “L” should show up between 9 a.m. and 7 p.m. on Saturday at the American Legion Post 510 in the village of Black Walnut on U.S. Route 6 between Laceyville and Meshoppen. Everyone else is assigned to between 10 a.m. and 4 p.m. on Sunday. Those who can’t make their assigned day may show up on the other one.

Landowners who can’t make either day should be receiving an e-mail with documents that need to be signed and mailed to Chesapeake. The $1,000-per-acre initial payment will be sent by mail.

On the Web

To sign up property for a gas lease: http://forms.askchesapeake.com/landowner

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

Copyright: Times Leader

Some landowners holding back, banking on economic improvement to bring better offers from drillers.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The offer is somewhat unconventional, but a natural gas company that’s leasing land in Luzerne County says its deal is a successful compromise for both parties, and leaseholders agree.

Denver-based WhitMar has locked up more than 22,000 acres in, among other places, Fairmount, Ross, Lake, Lehman, Union, Hunlock, Huntington and Dallas townships, according to company representative Brad Shepard.

The company is offering an unusual deal that has garnered both accolades from landowners for navigating the money squeeze caused by the recession and criticism for its lack of a long-term commitment. WhitMar, which Shepard said is involved in similarly complicated and expensive drilling operations in Oklahoma, Arkansas, Louisiana, Utah and the Dakotas, is offering a four-phase lease.

Landowners receive $12.50 per acre for the first year, after which the company decides whether it will continue the lease for a second year at the same payment rate. The lease also requires that within the first year the company begin the permit process for drilling at least one well and within the second year begin drilling at least one well.

For the third year, the company will offer a $2,500-per-acre, five-year lease on the properties it wants to keep, and landowners whose land gets drilled also will receive 19.5-percent royalties. Conservation Services, the company that amassed most of the territory, receives .5 percent of the royalties.

“As far as I know, that’s the highest royalty that’s been signed in Pennsylvania or New York,” Shepard said. “The reason we offered that royalty is literally because the landowners were willing to let us come in and test it up for $12.50” per acre.

The company then retains an option for a second five-year, $2,500-per-acre lease. “All together, it could be a 12-year lease,” Shepard said, but noted that the leases dissolve if the landowners aren’t paid. “So if they don’t receive a $2,500 payment or a $12.50 payment, the lease has expired because we didn’t pay them like we said we would.”

The offer has aroused reactions on both sides among affected landowners. Some urge restraint, predicting that better offers will crop up when the economy rebounds. “Right now, (gas companies) are picking all this low-hanging fruit,” said Ken Long, an executive committee member of the South West Ross Township Property Group that declined to recommend WhitMar’s offer to their group. “People are panicking to sign leases … because they want to get this monkey off their back.”

Landowners who signed leases note the generous royalties and the commitment to quickly begin exploration drilling. “I firmly believe that a sweeter, more lucrative deal can not be found in Luzerne County,” leaseholder Michael Giamber noted in an e-mail. “By comparison, the folks in Dimock (a truly proven area) can only get 18 percent. Over 30 years, a 2-percent difference in royalties can literally add millions of dollars in a landowner’s pocket.”

Shepard added that forced drilling likely means additional drilling will occur. “For the most part, once the drill rig’s brought in, it’s not brought in to drill one well,” he said. “As long as they hit, we have every intention of drilling as quickly as we can and our partner wants us.”

The company is still working out important specifics, though. First, it needs to find a larger partner to help drill, Shepard said, and it also must secure the rights to millions of gallons of water for the process that cracks the underground shale and releases gas.

In nearby counties, the company is working with Houston-based Carrizo Oil & Gas, Fort Worth-based XTO Energy, Inc., Louisiana-based Stone Energy Corp. and others, Shepard said.

He added that the company has received many offers from landowners to sell surface water on their properties, but said the company is not yet at the stage where it’s investigating water-acquisition options.

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

Copyright: Times Leader

Experts tell landowners to understand everything they are signing related to leases.

LEHMAN TWP. – Natural-gas drillers seem to be taking “a wait-and-see attitude” right now, according to Ken Balliet, a Penn State Extension director well versed in gas-lease issues.

If exploratory wells being drilled this summer are productive and some state regulatory issues are ironed out, gas-lease offers could jump, he said.

But as anticipation builds over natural-gas drilling in the region, here’s one thing landowners can expect.

“As soon as you sign a lease, in a few days or weeks, the price (others sign leases for) is going to go up,” Balliet said. “You’ve gotta understand this is still a highly speculative play.”

That said, landowners have many other issues to consider beyond the bottom line, according to other experts who spoke at a gas-lease workshop on Monday evening at Lake-Lehman High School. There are environmental, liability, property rights and payment issues that should be considered.

For Luzerne County landowners who are undergoing property reassessment, another concern is retaining the land’s “clean and green” tax abatement status. Dale Tice noted that the financial risk could be transferred to the drilling company. Tice, an oil and gas attorney, said an addendum could be added to leases to require drillers to pay any rollback taxes.

Another important lease consideration for farmers is making sure the drillers isolate the topsoil during excavation, pointed out Joe Umholtz, an oil and gas program manager with the state Department of Environmental Protection. DEP doesn’t have a regulation requiring that, he said.

Tice also mentioned inserting compensation clauses for crop loss and land damage.

Beyond soil and groundwater pollution or water usage, landowners should consider the sound pollution from compressor stations and other machinery.

While all the issues probably won’t deter wildlife indefinitely, drillers can arrive at any time of year, so owners should prepare accordingly for hunting seasons, the experts said.

Regarding payments, owners should be aware that companies currently deduct transportation costs for getting the gas to market, Tice said, but legislation is pending to ban that. Also, while companies might offer owners the opportunity to use as much gas as they want, the pressures involved make it practically unreasonable, so Tice suggested that owners negotiate for payments in lieu of the gas.

It’s also important, he said, to restrict lease rights to only what might come up from the well because a broader lease might allow extraction of other minerals.

Finally, he advised against allowing options to re-lease land, but instead offer the first right to refuse a new lease offer.

“If they drill a well, that means you’ve got one chance to get this lease correct. You need to be sure you understand everything you’re signing,” he said.

Copyright: Times Leader