Posts Tagged ‘Tom Murphy’

Holdouts wonder if someday they’ll be forced to enter into natural-gas leases.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

With more than 150 acres between her and her parents, Maria Rinehimer’s family could stand to make a tidy profit off natural-gas leasing. But their banker won’t need to worry about clearing out room in the vault any time soon – the family’s not interested.

“I think it’s a really bad thing for the area. If something happens, like a spill or something, I don’t think they’re going to clean it up for us. I think we’re going to be stuck with it,” Rinehimer said.

In Union Township near Shickshinny Lake, Rinehimer, her husband, Kevin, and her side of the family, the Scalzos, sit squarely within the current area of focus for the two gas companies partnering on drilling activities in the county.

The family’s aversion to leasing highlights several growing issues with increased drilling in the Marcellus Shale.

First, residents of northern Pennsylvania, who’ve long harbored suspicion of wealthy interests exploiting local resources such as coal and trees, question whether gas companies can be trusted on the face value of their assurances or if they’re just another chapter in the sad litany of robber barons.

And second, will people who don’t want to lease be forced to if everyone around them is? It’s a practice called “forced pooling,” and while it’s not yet legal in Pennsylvania’s Marcellus Shale, there is a bill in the state House, according to Tom Murphy, an educator with the Lycoming County Penn State Cooperative Extension.

“That would make everything in the Marcellus and below fall in the forced pooling scenario, but at this moment it has not been passed,” he said.

The practice, which is legal in New York, is defended as a way to reduce land disturbance by maximizing the area each well drains.

House Bill 977 – which is cosponsored by, among others, Reps. Karen Boback, R-Harveys Lake, Phyllis Mundy, D-Kingston and Jim Wansacz, D-Old Forge – has been sitting in committee since March.

Rinehimer attended a September meeting held by WhitMar Exploration Co., which later teamed with EnCana Oil and Gas (USA) Inc. to propose three wells in northern Luzerne County.

“He (a company representative) kind of went around the answer, and didn’t really go right ahead and say if something does happen to your water system and you can’t drink it … they’re going to clean it up for you,” she said. “Nothing was really clear.”

EnCana’s is sensitive to the issue, company spokesman Doug Hock said.

Its policy in this area is to monitor all water supplies within a mile of wells before and after the drilling occurs. The company cases wells with several layers and pressure tests, he said, ensuring the integrity of each well.

“If there were a loss of fluid or a loss of gas, we would know through that pressuring testing process,” he said.

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

Copyright: Times Leader

State is not seeing the same reduction in Marcellus Shale drilling as other areas.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

SCRANTON – The price of natural gas has dropped nearly to levels that make drilling in the Marcellus Shale unprofitable, according to a Penn State educator, but drillers have been hedging their prices and the Northeast is still the best-paying gas market.

Freefalling from a high in 2008 of around $14 per thousand cubic feet, prices are currently around $4 per thousand cubic feet, hovering just above the $3.75 threshold that companies believe makes Marcellus Shale drilling unprofitable, said Tom Murphy, an educator with the Lycoming County Penn State Cooperative Extension. He spoke on Tuesday at a public-education meeting sponsored by the Lackawanna Heritage Valley Authority at the Steamtown National Historic Site.

But many companies hedged their gas sales months ago at around $9 per thousand cubic feet, he said, and because much of the Northeast uses natural gas for home heating, Pennsylvania isn’t seeing the same reduction in drilling rigs as other shale drilling areas.

“The proximity of that (the Marcellus Shale) is what a lot of this is about,” Murphy said. “They are leasing right now, but they’re leasing for a lot less than they were before. … It’s not a matter of is this coming. It’s a matter of how big is this going to be.”

Companies are mostly leasing strategically to fill in holes in drilling units while slowing production to reduce supply and increase prices, he said. But the usual three-month to six-month falloff between reduced production and reduced supply isn’t occurring. “There’s so much gas coming out of these shales, and the Marcellus Shale is one of those, that the lag time is nine to 12 months,” Murphy said.

Still, the “weakest link” in the industry is dealing with contaminated wastewater, he said. While there are eight deep-injection wells in the state, only one is available for industry use, and it’s in the southwestern part of the state.

The vast majority of the water is being treated at municipal sewage facilities. There, the heavy metals are removed, and the brine is simply diluted and dumped into waterways in the Susquehanna River watershed.

“It’s actually starting to get to the point where it’s starting to exceed what can be put in” the watershed, Murphy said.

Another water issue is managing pollution at the drilling site, said Jim Garner, the Susquehanna Conservation District manager. “They talk about restoration; they like to do restoration,” he said, displaying a photograph of sediment fencing at a site that had been compromised by runoff. “In practice, it’s a different situation. … We’ve only seen several sites fully restored. It can be pretty challenging.”

As the drilling ramps up, hundreds of trucks will be driving over Susquehanna County’s many dirt roads, he said. The unstable roads combined with the county’s many waterways create 2,712 potential pollution sites, he said. “In a few weeks, it’s really going to be interesting to see how these roads don’t hold up,” he said.

Garner’s district has approved only one erosion and sedimentation plan and just two others have been submitted, he said. All the activity and unresolved concerns have created a swirl of public speculation, he said. “I’ve been with the district 15 years. I have never heard anything create rumors like this.”

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

Copyright: Times Leader

Lucrative leasing deals are possible for area residents. Negatives: Noise, pollution.

The opportunity won’t come to most Northeastern Pennsylvania landowners, but those offered a natural-gas well will face life-changing effects, both positive and negative.

“It’s going to transform Pennsylvania, there’s no doubt about it,” said Ken Balliet, a Penn State Cooperative Extension director well-versed in gas-lease issues. “This whole Marcellus shale play is highly speculative” for the gas companies, he said, because it’s not very well studied, but landowners who land lucrative deals will see it otherwise. “When you hand someone a check for half a million dollars, that’s not very speculative.”

Add to that well-siting and annual royalty payments, and suddenly the problem becomes trying to find tax havens for the profits.

The tradeoff, however, is an unexpected and sometimes unwelcome bustling of activity — trucks, noise and pollution. Many of the changes will come and go, but some – like a clear-cut well site or a noisy compression station – will remain for decades.

It’s a sacrifice Jerry Riaubia is willing to make on his 16 acres in Sweet Valley – if the right number is on the checks and they keep coming. “If I had an income for my family, it would be well worth it,” he said. “We could help the economy out if we had that money. It could save our economy.”

For many rural landowners, the offers are difficult to pass up. Reports of leases offered at $2,500 per acre are common as close as Wyoming County, and companies have increased production royalties from the state-mandated 12.5 percent to 18 percent as owners become more educated.

Even with just his 16 acres in a standard 600-acre drilling unit, and estimating modest gas extraction at 18 percent royalties on a single well, Riaubia stands to pocket around $117,000 over the well’s lifetime, according to www.pagaslease.com, a Web site run by landowners who were approached early on about leasing.

That’s only the profits from a single well, and far more than one can exist at a site. “We heard of one company had drilled 27 on one pad,” said Tom Murphy, a Penn State Cooperative Extension educator.

And as oil prices increase, so will natural gas prices, according to a 2005 report by the Schlumberger oil and gas company. “The price of gas is linked to oil and based on each fuel’s heating value,” the report notes. “As long as oil prices remain high, there is no reason for natural gas prices to go down. Although gas is abundant in much of the world, it is expensive and potentially dangerous to transport internationally.”

That financial windfall might be just a pipedream for Luzerne County residents, though.

Chesapeake Energy Corp., one of the largest leaseholders in the Marcellus play, isn’t leasing in the county, according to Matt Sheppard, the company’s director of corporate development. A single listing exists for Luzerne County on the gas lease Web site’s lease tracker. Signed in late May, the five-year offer was $1,500 per acre with 15 percent royalties.

While Riaubia said he hasn’t been approached by any companies, land groups in northern municipalities in the county, such as Franklin Township, have been negotiating. Rod McGuirk, who owns 56 acres in the township, said owners there have been offered $1,800 per acre. “They’re just preliminary offers, but we’re excited,” he said.

That excitement could quickly wane if problems crop up or owners are unprepared for the realities of drilling. Unlike other unconventional gas sources, shale wells produce consistently over three decades, so well sites are more or less permanent. Even after sites are reclaimed, some infrastructure is left behind.

Also, because gas is transported nationally through lines that are more compressed than regional distribution lines, noisy compression stations will need to be installed in what are otherwise bucolically quiet locales.

Then there’s the potential to unearth radioactive materials, acid-producing minerals and deplete water resources. In fact, after concerns arose about the amount of water necessary to drill a well, the state Department of Environmental Protection included an addendum to its drilling permit that addresses water usage and is specific to Marcellus shale.

Still, officials assure that regulatory agencies are keeping tabs on drillers. “There’s an awful lot of eyes watching the streams up there,” DEP spokesman Tom Rathbun said. “So these guys aren’t just going to be able to dump stuff. … If they start killing streams, a lot of people are going to find out quickly.”

And aside from that, he said, the financials force the industry to regulate itself. “The Marcellus shale is not really a business for fly-by-nighters,” he said. “You don’t throw $10 million away because you were cutting corners on an environmental regulation. Now that they know we’re watching … there’s too much money on the line for these guys to do stupid mistakes or to cut corners.”

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

Copyright: Times Leader