Posts Tagged ‘Oklahoma’

By Elizabeth Skrapits (Staff Writer)
Published: July 22, 2010

FAIRMOUNT TWP. – In one Luzerne County municipality, a natural gas drilling rig towers in the background as a guard keeps vigil against unauthorized personnel at the gate that is kept open to allow trucks to pass in and out of the site.

In another Luzerne County municipality a few miles away, new electrified fencing surrounds a meadow and engineers’ trucks kick up dust along the freshly re-graveled road.

On Wednesday, Encana Oil & Gas USA Inc. started drilling the county’s first exploratory natural gas well in Fairmount Township, and also began site preparation for a second well in Lake Township.

Encana spokeswoman Wendy Wiedenbeck said the drilling components have arrived and operations are moving forward on the site owned by Edward Buda in Fairmount Township, on Route 118 behind the Ricketts Glen Hotel. The well will be drilled about 7,000 feet deep, then go out 2,500 to 5,000 feet horizontally.

Asked what motorists can anticipate near the site, Wiedenbeck said, “We would expect some additional truck traffic. There is signage on the road leading up to and away from the location.”

Noise and dust are side effects of the drilling process, which it is estimated will take about 30 days, Wiedenbeck said. Encana will monitor and mitigate both the dust and the noise at the site, and the company is working closely with Fairmount Township officials, she said.

About a quarter of a mile down Route 118 from the drilling site, Good’s Campground owner Frank Carroll was cutting firewood Wednesday afternoon. He noticed there has been a lot of truck traffic at the drill pad.

“Crazy thing is, all I can hear is the backup of the trucks – you know, beep-beep-beep,” Carroll said as he piled the cut wood in the bed of his pickup truck and pulled a blue tarp over it. “It doesn’t bother me, but I can hear it.”

Carroll says he wakes early and sleeps soundly, so he doesn’t expect the 24-hour-a-day, seven-days-a-week drilling operation to disturb him.

“I’d sleep through the end of the world,” he joked.

One thing does bother Carroll: the speculation. Will the well pay off in royalties to landowners who leased mineral rights?

“Everybody’s been talking about it for two years, how they’re going to get rich or they’re going to get nothing,” Carroll said. “And they’re still talking about it. They all think they’re going to be rich – and they can’t all be rich.”

As soon as drilling is complete in Fairmount Township, the rig, from Horizontal Well Drillers of Purcell, Okla., will be taken to the Lake Township site.

“Efficient work operations is to go from one area to the other,” Wiedenbeck said.

In Lake Township, heavy truck traffic warning signs are in place on Meeker, Outlet and other roads to be traveled by the approximately 2,100 total trucks it will take to create the drilling pad, drill the well and bring in the roughly six million gallons of water needed for hydraulic fracturing.

Robert and Debra Anderson live so close to the Zosh Road site that will be transformed into a natural gas drilling pad they could throw a baseball from the front yard of their trailer home and easily have it land over the electrified wire fence surrounding the meadow belonging to Paul and Amy Salansky.

The Andersons love the area, which is full of wildlife: “I have turkeys, I have deer, I have foxes, I have bear … I even have ducks in my pond,” Debra Anderson said.

Things were quiet on Wednesday afternoon, but in the morning, there was a “big meeting” at the drill pad site, Robert Anderson said.

Just then a pair of engineers drove by in a Borton-Lawson truck, stirring dust from the road as they passed.

But not much dust. The Andersons are pleased with the work Lake Township’s three-man road crew has done on the dirt-and-gravel roads around the site: enlarging them, smoothing them, lining the drainage ditches with rock. Debra Anderson declared she hasn’t seen the roads look that good in the 15 years they’ve lived in the township. Encana’s paying for the road maintenance, Robert Anderson said.

Lake Township will provide dust control with calcium chloride applications on the roads, he said. But what about the noise and light when drilling starts?

“We’ll deal with it. You can’t stop progress,” Robert Anderson said.

He called Encana a “reputable company, not like the one that’s up in Dimock,” and said its representatives are good about telling residents what’s going on. He said he attended the last Lake Township meeting, at which dozens of natural gas drilling opponents showed up, and he said they should go to the company for information, not the supervisors.

“People that go to the Lake Township meetings should be Lake Township residents,” Robert Anderson said. “It’s no one else’s concern.”

eskrapits@citizensvoice.com , 570-821-2072

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Copyright:  The Citizens Voice

By Elizabeth Skrapits (Staff Writer)
Published: July 5, 2010

Luzerne test wells’ results awaited

Depending on how its first natural gas wells turn out, Luzerne County could attract a lot of attention from potential drillers.

“I suspect everybody’s interest levels will be piqued if Encana gets successful,” said Steve Myers, director of Land and Legal Affairs for Citrus Energy Corp.

Encana Oil & Gas USA Inc. is poised to start drilling two exploratory natural gas wells this summer, one in Fairmount Twp., on the property of Edward Buda off Route 118, and the second in Lake Twp. on the property of Paul and Amy Salansky on Sholtis Road.

Drilling for natural gas in an area once known for anthracite coal mining is a daring move, by industry standards.

“Everyone’s nervous about going that far south,” Mr. Myers said.

Maps of the Marcellus Shale show the formation running throughout Luzerne County. However, its shale may not be very rich in gas due to the proximity of the anthracite coal-producing areas and high temperatures, which can turn the gas into carbon dioxide, Mr. Myers said.

“There’s some concerns that the Marcellus Shale was subjected to some high temperatures, high pressures that would have converted the shale to graphite and cooked off whatever gas was in place,” he said.

There’s a line that exists, but nobody knows exactly where it is, Mr. Myers said.

“One side, it’s going to be productive; you throw a rock and it’s not,” he said. “Kind of like a summer shower. It can rain across the street, but it doesn’t rain in your yard.”

Encana officials are willing to take the risk.

“We’ve said all along that it’s exploratory, and we have to prove we can develop commercial quantities of natural gas,” Encana spokeswoman Wendy Wiedenbeck said.

“We’re not focused on what other operators are doing; we’re just focused on acting responsibly and getting the wells drilled. And the well results will speak for themselves.”

Although the drill rig is expected to arrive in Fairmount Twp. at some point after today, and the drilling and completion process will take an estimated 65 to 75 days total, production results won’t be in until the end of the year or even 2011, Ms. Wiedenbeck said.

Gas production for the Fairmount Twp. and Lake Twp. wells will have to be reviewed before Encana makes further plans, she said.

At one time Citrus had considered drilling in Luzerne County, leasing hundreds of acres in Lake and Fairmount townships in partnership with Tulsa, Okla.-based Unit Corp. But the partnership broke up and Citrus ended up selling off almost all its leases to Williams Production Appalachia.

Williams Inc., also based in Tulsa, does natural gas drilling and processing, and owns thousands of miles of pipelines, including the Transco, which runs through northern Luzerne County – conveniently close to Encana’s planned drilling sites.

Williams has received permits from the state Department of Environmental Protection to drill three wells in Columbia County: two in Benton and one in Sugarloaf Twp.

Another natural gas company, Oklahoma City-based Chesapeake Energy, also has dozens of leases in Luzerne County but hasn’t made a move yet.

“Chesapeake is still evaluating the area. However, as we drill each new well, we learn more about the potential and the productivity of particular geologic areas, and this information guides our decisions about where to focus future activity,” Brian Grove, Chesapeake director of corporate development, stated in an e-mail.

For the time being, Citrus is focusing its efforts in Wyoming County, according to Mr. Myers. The company has drilled four wells so far in a successful partnership with Procter & Gamble, and has more in the works.

Citrus also plans to drill its own wells in Wyoming County, where it has leased large chunks of land – as have Chesapeake, Carrizo Marcellus LLC, Chief Oil & Gas, and others drawn by the prospects of production in Luzerne County’s neighbor to the north.

“It’s very much a hotbed of activity,” Mr. Myers said. “Any time you get good production, people are going to come. … We expect to have plenty of company here in the future.”

Contact the writer: eskrapits@citizensvoice.com

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Copyright:  The Scranton Times

WILKES-BARRE – Democratic gubernatorial nominee Dan Onorato said Thursday he doesn’t support a moratorium on drilling in the Marcellus Shale region, but he does want to see the gas industry grow in “a responsible way.”

“I will grant permits,” Onorato said. “But I want these companies to hire Pennsylvanians. I don’t want to see a bunch of Oklahoma and Texas license plates here.”

Onorato visited the Scranton Chamber of Commerce to speak to members and young professionals of POWER Scranton to discuss the opportunities for economic growth in Scranton.

“Northeast Pennsylvania is in a unique situation to benefit from great economic growth,” he said. “The combination of location, resources and infrastructure could lead to an economic boon for the region’s economy.”

Onorato is opposed by Republican Tom Corbett, who has served two terms at the state’s attorney general.

Onorato knows Northeastern Pennsylvania – he is married to the former Shelly Ziegler of Mountain Top. Onorato said he has traveled to the region regularly for the past 20 years to visit his in-laws, Bill and Sue Ziegler.

“The northeast region is very important to me,” he said. “I will be campaigning here a lot over the next 17 weeks. I see a lot of similarities between here and my home area of Pittsburgh.”

Onorato, 49, has served as the Allegheny County executive for seven years. He boasts that when the next budget is passed in October, it will mark 10 straight years of no tax increase in the county.

“I’ve run the second largest county in the Commonwealth,” Onorato said. “We’ve downsized government – going from 10 row offices to four and we consolidated five 911 centers to one. Those two moves alone saved taxpayers $7 million per year.”

Onorato, the father of three teenagers, said he is optimistic about the governor’s race. He said he doesn’t believe a poll released last week that showed Corbett ahead by 10 percentage points.

“The same people that did that poll also had McCain ahead of Obama in 2008,” He said. “All the polls I’ve seen show this race to be neck-and-neck. I know it will be a battle, but I believe I can win.”

Onorato said the northeast region’s proximity to New York and New Jersey makes it the perfect location to become the warehouse distribution center for the eastern part of the country.

“I see a lot of potential here,” he said.

The Democrat said he would seek to enact a severance tax on the Marcellus Shale drillers and he would use the revenue to fully fund the state Department of Environmental Protection. Onorato said DEP took a 28 percent budget cut last year and he wants to return the department to full capacity.

“If we’re going to allow drilling, then we need a department to watch over it and protect the water and the environment,” Onorato said.

Bill O’Boyle, a Times Leader staff writer, may be reached at 829-7218.

Copyright: Times Leader

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

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Copyright: The Scranton Times

He tells symposium Pa.’s “bureaucratic BS” is limiting operations.

PLAINS TWP. – To hear John Baen describe it, Pennsylvania is like an awkward, naive suitor, dithering over the details so much that it’s stumbling on the walk to the front door and turning off its hot date: natural gas drillers.

The industry has recently increased its complaints about what it sees as the state’s excessive regulatory procedures – or “bureaucratic BS,” as Baen put it on Wednesday – that are souring hopes to ramp up drilling in the potentially lucrative Marcellus Shale about a mile under much of northern and western Pennsylvania, among other states.

Keeping things green is important, the real-estate expert and University of North Texas professor said, but not as much as making some green. “I know you’re sensitive to your environment and all that, but it’s four acres (disturbed for drilling) out of 5,000” acres that are then producing gas, he said. “Would you allow a drilling rig in your back yard? … It depends on what they’re willing to pay you extra.”

Baen was one of three gas industry experts speaking at a Marcellus Shale Symposium hosted by the Joint Urban Studies Center at the Woodlands Inn & Resort. The center, a partnership of local colleges and universities, provides economic research for regional planning.

The experts were brought in to discuss their impressions from the proliferation of drilling in the Barnett Shale, a similar gas-filled rock formation in north Texas. Though concerns were addressed, such as potential environmental damage and likely workforce shortages, sanguine profiteering was emphasized repeatedly.

William Brackett, the managing editor of an influential Barnett Shale newsletter, noted the local job market and economy ballooned 50 percent in 2007 to 83,823 jobs and an $8.2-billion economic benefit. The same good fortune is befalling rural Pennsylvania farmers who were near destitute, he said. “All the sudden, they get a new barn and are able to send their kids to college.”

Of all the speakers, the most subdued in his support of the industry was Matt Sheppard, a director of corporate development for Oklahoma-based Chesapeake Energy, which sponsored the symposium. Though natural gas drilling has been in the state for decades, it has lain pretty low, he said. “This is not an industry that has done a great job of talking about things, explaining things,” he said. “We’re here for one reason, and that is that Americans are demanding cleaner energy right now. … And the truth is we’re not going to the other way.”

The presenters said the industry is looking for straightforward rules like in other states, which have standardized drilling manuals and few other regulatory hoops. But despite Baen’s dire predictions that drillers might pull up stakes, Sheppard assured his company was likely sticking it out.

“At Chesapeake, we’re big believers in organized development,” he said. “You’re not going to see a lot of companies come in here and drill one well and leave. … You invest this amount of money in a state, you’re going to be around a while.”

Copyright: Times Leader

Official lays out efforts to protect environment

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

DALLAS TWP. – The man in charge of ensuring the oil and gas industry complies with environmental regulations in Pennsylvania spoke at a well-attended Back Mountain presentation on Tuesday, informing the public about protections in place and what is being done to improve public safety.

Scott R. Perry, director of the state Department of Environmental Protection’s Bureau of Oil and Gas Management, provided an overview of how drilling into the Marcellus Shale formation differs from other forms of natural gas drilling and discussed the bureau’s current work and future plans to protect the environment.

Misericordia University President Michael MacDowell welcomed Perry to the school’s Lemmond Theater, and assistant professor Julie Kuhlken, who teaches environmental philosophy, moderated a question-and-answer session afterward.

Oil and gas drilling began in Pennsylvania in 1859, Perry said. But new technology that enables horizontal drilling into the 5,000- to 7,000-foot-deep Marcellus formation has brought to the state energy companies that have until recently focused their efforts in western states.

“One of the things we noticed is that people from Texas and Oklahoma aren’t really familiar with hills. Pennsylvania has them, and we also have rain, more so than Texas, and so there have been some struggles in developing these well sites,” Perry said.

Pennsylvania, he noted, is the only state that requires an approved erosion and sediment control plan before a drilling permit is issued.

In his computerized slide show, Perry showed a photo of an erosion-and-sediment control violation at a state drilling site. Controls on the main level were fine, but farther down a hill, a DEP inspector found “a bunch of hay bales” and “silt fence that’s not doing any good.”

“I asked the inspector who took this picture what he thought they were thinking. He said, ‘I think they were thinking I wasn’t going to walk down that hill,’ ” Perry said, eliciting laughter.

DEP forced the operator to put proper controls in place.

Perry noted the DEP hired 37 inspectors in 2009 and is hiring 68 more this year to nearly double the size of the inspection staff to 193. Three-fourths of those employees will oversee the oil and gas industry; higher permit fees pay for it all.

Perry said he believes there are adequate regulations in place to protect public health and safety and the environment, but he supports several provisions in proposed legislation, such as one that would increase bonding requirements for drilling companies.

Perry said DEP officials are “always evaluating” regulations, and when they’re inadequate “we’re strengthening them. … For example, we’re evaluating the permit requirements for air quality. … We’re not done with the evaluation and regulation process for this industry. They’re just getting started and so are we.”

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

Copyright: Times Leader

75 percent of gas production workforce composed of unskilled, semi-skilled jobs.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

If natural gas production from the Marcellus Shale is as successful as energy companies and landowners hope, the companies likely will need to hire more employees to man wells, perform testing for and oversee the drilling of new ones and monitor their operations.

“The jobs associated with natural gas drilling are well-paying jobs,” said Doug Hock, spokesman for Calgary-based Encana Energy, which has its U.S. headquarters in Denver, Colo.

Salaries even for less-skilled positions generally range between $60,000 and $70,000, Hock said.

The types of company jobs that usually become available when drilling operations are successful include drilling engineers, geologists and geophysicists and permitting experts. Pumpers, employees who check wells on a regular basis for proper operation, will be needed after more wells are drilled, Hock said.

Other positions with energy companies include experts in land negotiations and in community relations, he said.

Rory Sweeney, spokesman for Chesapeake Energy, said the Oklahoma City, Okla.-based company currently has 1,032 employees working in Pennsylvania, up from 215 in January 2009.

Local employment

As far as local employment, Sweeney said 168 employees report to local offices, “but we have more than 1,000 statewide and most of them are working rigs in NEPA.”

Types of workers expected to be hired include welders, rig hands, production workers, engineers, drilling and land technicians, pipeline field staff, construction field staff, administrative support and dozens of other occupations.

Last summer, the Marcellus Shale Education and Training Center at the Pennsylvania College of Technology conducted a Marcellus Shale Workforce Needs Assessment study that looked at potential workforce needs in two tiers of Pennsylvania counties – the northern tier, which borders Luzerne County to the north, and the central tier, which borders Luzerne County to the west.

The northern tier includes Wyoming, Sullivan, Susquehanna, Bradford and Tioga counties; the central tier includes Clinton, Centre, Columbia, Montour, Northumberland, Union, Snyder, Lycoming and Mifflin counties.

The study found that the direct workforce needed to drill a single well in the Marcellus Shale region is comprised of more than 410 individuals working in nearly 150 different occupations. The total hours worked by these individuals are the equivalent of 11.53 full-time, direct jobs over the course of a year.

The study notes that nearly all of these jobs are required only while wells are being drilled.

By comparison, 0.17 long-term, full-time jobs associated with the production phase of development are created for each well drilled in a given field. While comprising a very small percentage of the overall workforce, these long-term jobs compound every year as more wells are drilled. For example, if 100 wells were drilled each year for 10 years, 17 production jobs would be created each year, according to the study.

The study found the majority of occupations in the direct workforce were unskilled or semi-skilled jobs including heavy equipment operation, CDL truck operation, general labor, pipefitters and a variety of office-related occupations. These occupations account for about 75 percent of the workforce.

Learn on the job

Industry representatives, survey respondents and additional research indicated that most of these occupations require no formal post-secondary education, and only a few, such as CDL, welding and X-ray, require a specialized license or trade certification.

However, nearly all of them require the skills and knowledge unique to the natural gas industry, which are best learned through experience. Workers within all occupations of the natural gas industry are additionally prized for their hard work ethic and willingness to work very long hours in unfavorable conditions, the study found.

The majority of the remaining 25 percent of workers are in occupations that are white collar in nature, including foremen, supervisors, paralegals, Realtors, engineers and geological scientists.

Larry Milliken, director of Energy Programs at Lackawanna College, said that industry wide, jobs in the gas and oil drilling industry pay about 20 percent better than the same types of jobs in other industries.

“Around here, there are an awful lot of jobs in the $9- to $14-per-hour range. Jobs in the oil and gas industry tend to start in the $18-per-hour range and go up from there,” Milliken said.

A petroleum engineer might earn $40,000 to $45,000 teaching at a college or university, but working in the field for a gas or oil company, the engineer could make close to $90,000, he said.

The average technician in the natural gas industry can expect to earn about $30 per hour, which equates to an annual salary of about $60,000. A starting technician with a two-year degree can expect to earn $18 to $20 to start, amounting to a salary near $40,000, Milliken said.

In gas production growth areas, employees with at least associate’s degrees would tend to progress up the employment ladder “faster than someone off the street,” Milliken said.

Sweeney said Chesapeake has a variety of recruiting events, such as a drill-rig worker recruiting event this week through PA CareerLink, and a job fair in Towanda in October that attracted more than 1,000 applicants.

Chesapeake also employs a Scranton-based professional recruiting firm to recruit local employees for NOMAC, Chesapeake’s wholly owned drilling subsidiary.

Company officials plan to build a residential and training facility in Bradford County this year to serve as quarters for out-of-town employees and as NOMAC’s Eastern U.S. Training Facility, which will help the company train workers, Sweeney said.

Coming tomorrow: Schools gear up to train Marcellus Shale workers.

Copyright: Times Leader

N.J. gas firm eyes $300M income

ANDREW MAYKUTH The Philadelphia Inquirer

A southern New Jersey gas firm that bought a $2 million Marcellus Shale interest in 2008 says it might generate $300 million in income over its lifetime.

South Jersey Industries Inc., the Folsom, N.J., company that owns South Jersey Gas and several nonutility energy businesses, disclosed to analysts that its purchase of mineral rights in northern Pennsylvania could pay off handsomely.

Chief executive officer Edward J. Graham, speaking to analysts about the company’s annual earnings, said two horizontal wells in which South Jersey Industries has a stake will begin producing income this quarter.

He said the gas operator, St. Mary Land & Exploration Co., of Tulsa, Okla., was still tying the wells to a pipeline, but feels “really good about the prospects.”

Two more wells are planned for this year on the 21,000-acre property in McKean County.

In early 2008, South Jersey Industries paid $2 million for an interest in a partnership that owns the deep-gas rights on the property, Stephen Clark, the company’s treasurer, said in an interview. Since then, the value of mineral rights has skyrocketed.

South Jersey Industries estimates that its combined royalties and ownership rights will net 10.25 percent of the value of the gas produced — the company’s share would be about $300 million, based on an average price of $6 per thousand cubic feet.

“It has the opportunity to be very productive for us,” Clark said.

Graham told analysts that it was premature to estimate earnings, which depend upon the number of wells drilled and the price of natural gas. Production could take years, or even decades, to realize.

The estimates illustrate the huge potential in the Marcellus Shale, which lies under much of Pennsylvania and several surrounding states.

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