Posts Tagged ‘Wyoming County’

Tunkhannock expecting $439,975 check in March from Chesapeake Energy.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Tunkhannock Township in Wyoming County announced this week it received the signed agreement for its gas-drilling lease with Chesapeake Energy for about 76 acres of public land.

The up-front bonus check for $439,975 is expected in early March.

The township board had signed the lease in October, but the process was delayed because of municipal regulatory requirements.

“We were part of the Wyoming County land group, but we had to put it out for bid being a municipality,” said Judy Gingher, the township’s secretary.

The bid stipulated, however, that the winning bidder had to have at least 1,000 acres already leased in the township, and no one entered a bid.

The township received $5,762 per acre, which was $12 per acre more than for private landowners, Gingher said. The township currently has no plans for the money.

“They’re looking possibly just to invest it,” Gingher said.

Gingher said there were minor community concerns about surface-drilling activity because much of the land is in the township’s 42.5-acre Lazy Brook Park, which hosts a variety of community functions.

The land might be off limits to surface activity because of building-setback requirements and deed restrictions.

Much of it was purchased in 2006 through hazardous flood mitigation buyouts, which carry emergency management agency restrictions that prohibit permanent structures.

Township Solicitor Paul Litwin was unsure if drilling would be considered a restriction, though, because the drilling infrastructure is temporary and the resulting well pad likely wouldn’t impede flood flow, which is the purpose of the restrictions.

Structures are permissible “as long as you don’t increase the flood height with the structure, and a pad would basically be flat once you put the structure in,” he said.

“The question we’ll have to resolve if they want to put a pad there is that a permanent structure, and we’ll have to look at that if and when they want to do that. … They haven’t applied yet, so we haven’t looked at it yet. … My guess is it probably would not be considered permanent.”

Brian Grove, the director of corporate development at Chesapeake, declined to comment on the lease or plans for the property.

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

TUNKHANNOCK – As if responding to previous community criticism about a similar facility, company officials hoping to build a drilling-waste treatment plant near Meshoppen said Tuesday recycling water is part of their plans.

“It makes sense to reuse this water,” said Ron Schlicher, an engineer consulting for the treatment company. “The goal here is to strive for 100-percent reuse, so we don’t have to discharge.”

Wyoming Somerset Regional Water Resources Corp. is proposing a facility in Lemon Township in Wyoming County to treat water contaminated during natural-gas drilling in a process called hydraulic fracturing, or “fracking.”

To do so, it requires a National Pollutant Discharge Elimination System permit from the state Department of Environmental Protection.

That process includes a period of public comment, for which the hearing at the Tunkhannock Middle School on Tuesday evening was held.

Wyoming Somerset is the second company to propose such a facility in Wyoming County. Two weeks ago, DEP held a similar hearing for North Branch Processing LLC, which wants to build a plant just outside Tunkhannock in Eaton Township to discharge up to 500,000 gallons daily of the treated waste into the Susquehanna River.

Citizens attending that hearing complained that the discharges could potentially harm the river’s ecology and suggested that the waste simply be recycled into other fracking jobs.

Wyoming Somerset’s proposal is to discharge up to 380,000 gallons daily into the Meshoppen Creek, but company officials said they hoped to sell it all back to drillers instead.

“The discharges need to be in place to make sure that the weather doesn’t have an adverse effect on operations of cleaning the water,” said Larry Mostoller, Wyoming Somerset’s president. “I’ll be willing to drink what we produce. I’ll be willing to drink what comes out of this plant, and you can hold me to that.”

That promise and the vague goal of full reuse didn’t sit well with the roughly 75 citizens who attended the hearing. Questioning everything from why the facility couldn’t guarantee zero discharges to its proposed site, residents came out squarely against the plan.

Many non-residents joined them, including two from Bucks County, one an environmental scientist and the other a lawyer, and a man from New Jersey.

Don Williams, a Susquehanna River advocate from Lycoming County, warned that cashing in on the gas-laden Marcellus Shale is “jeopardizing our land and our feature for the false promise of jobs” and money.

Of particular frustration for many were the unknown details about the plant’s design. Schlicher presented an overview of it, noting reverse-osmosis filters, evaporation tanks and a three-tiered output to provide drillers with water at various levels of treatment.

The water that could potentially be discharged would be “essentially meeting drinking water standards for most things,” Schlicher said, but not everything, including lead, aluminum and iron “because the surface water body can handle them,” he said.

Design specifics won’t be known until the second part of the application, when the company proposes how it will meet its discharge limits. That part likely won’t have a public hearing, DEP officials noted.

Those wishing to comment on the proposed facility may do so until Oct. 30 by contacting the DEP. The number for its Wilkes-Barre office is (570) 826-2511.

Copyright: Times Leader

Landowners in Wyoming County get some good protections, attorney says.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The lease that Chesapeake Energy is offering to Wyoming County Landowners group members is clearly a compromise between landowners and the company, according to an experienced gas-law attorney, but includes “many of the protections that we like to see for landowners are built into this lease.”

Dale Tice, an attorney with Williamsport-based Greevy and Associates who has clients in the Wyoming group, characterized the wording in the lease offer as “very competitive with the leases we’ve seen.”

Tice, whose office has gained somewhat of an expertise in gas law since companies began descending on Lycoming County a few years ago, said he usually disapproves of a five-year re-leasing option being available to companies, but noted that it’s “understandable” why Chesapeake would want that because it’s leasing so much land that it will take years to explore the whole area.

He also said that the $20-per-year fee paid if a well is shut off to eliminate production during a bad market “is as good as they’re going to do.”

While Tice declined to identify negatives in the lease and cautioned that his comments shouldn’t be construed as legal advice, he noted several positives: including in-depth wording to limit production-unit sizes, termination of the lease on land that isn’t part of a production unit, the company’s responsibility to pay property-tax rollbacks on Clean and Green properties and mutual written agreement on placement for wells, pipelines and other infrastructure. Additionally, he said, the lease requires that all infrastructure sited on a property must be tied into gas production at the property.

“There’s always somewhat of a question there because, although the gas company and the landowner must mutually agree in writing as to the location, the gas companies always add some language that says lessors can’t be unreasonable” about siting infrastructure, he said.

Though there is no specific reference to siting waste-deposit wells on the properties, “sometimes,” he said, “if they (landowners) don’t give them (drilling companies) the right, they don’t need to take it out, so to speak.”

The lease is “clearly the product of extensive dialogue between the parties,” Tice said. “I think this does a good job of striking a compromise where the landowner has a lot of good protections worked into it.”

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

Copyright: Times Leader

The company hopes to see more than two dozen wells drilled on its property.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

MEHOOPANY — In October, drilling for natural gas will begin at the Procter & Gamble plant in Mehoopany, and, if geologic estimates pan out, the company hopes to eventually see more than two dozen wells drilled on its property, saving it “tens of millions” of dollars annually for years to come.

The Wyoming County plant consumes about 10 billion cubic feet of natural gas a year that is piped up from the Gulf Coast, company spokesman Alex Fried said. The hope is that drilling on its own property will alleviate much of that need.

“If the wells are productive, sure there’s the possibility. We’ve got enough property there,” Fried said. “If they can supply that, I’ll gladly take it because I’d rather get it from under my own ground.”

Located in Wyoming County, the plant sits in a potentially productive section of the Marcellus Shale, the layer of rock about a mile underground stretching from New York to Virginia that has natural gas locked within its pores. Though it was known about for decades, accessing the rock has only recently become financially feasible with advancements in technology.

Colorado-based Citrus Energy Corp. contracted with P&G to construct five well pads at the company’s 1,300-acre property on the bank of the Susquehanna River. The township gave approval for all five sites, as did the state Department of Environmental Protection for the erosion and sedimentation plans.

Additionally, Citrus got a permit in December from the Susquehanna River Basin Commission to withdraw 499,000 gallons of water per day from the river. It has been bonded with the Pennsylvania Department of Transportation to cross state Route 87 and signed a road-maintenance agreement to use Carney Cemetery Road to access the sites.

Citrus still needs drilling permits from DEP for two sites, but Fried said the sites currently aren’t necessary. “The (sites) at the westernmost and easternmost part of our property aren’t going to be built until next year,” he said.

Starting in October, a well will be drilled at each of the middle three pads. Next year, if the geological indications look good, the company will consider drilling the wells deeper by going horizontally through the shale seam.

After that, the focus will shift to the two remaining pads.

If that all works out, Fried said, P&G could lease land at a 300-acre warehousing site about a mile from the plant, where at least one more pad could be built. In all, Fried estimated, perhaps 30 to 35 wells could be drilled.

Fried declined to discuss the royalty deal struck with Citrus, but described it as “very competitive” because the company could offer a variety of advantages, including access to water, industrial zoning and a direct connection between the buyer and seller.

It also boasts rail access, which Fried said could be used in the future to haul away the contaminated fluid that’s used to break open the rocks and release gas.

The drillers “can haul away 35,000 gallons at a time on a tanker car,” Fried said.

Another benefit is that the gas doesn’t have to go far to get used. “The pipeline will bring it right to the plant, so we’ll still get our royalty, except it just will be a discount off the price of the gas that we’re purchasing,” Fried explained.

Fried said interest in inking a deal came from both sides. He began researching the possibilities at the beginning of the year, around the same time unsolicited calls started rolling in from gas companies.

Originally, the companies simply wanted to lease the land and sell the gas, but Fried had another idea – keeping the gas at home.

“In many cases, they just came in and said, ‘We want to lease,’ ” he said. When he told them how much gas P&G would be willing to buy each year, “their jaws dropped and hit the floor,” Fried said.

Copyright: Times Leader

Gas-drilling leases negotiated in Wyoming County, not coming as quickly here.

TUNKHANNOCK – While Wyoming County landowners are heavily involved in the regional natural-gas boom, almost all Luzerne County landowners are out of luck, at least for now.

“It’s not always fun. There’s going to be some angst, there’s going to be some anxiety,” said Jack Sordoni, who heads Wilkes-Barre-based Homeland Energy Ventures LLC.

Energy companies and geologists have estimated for decades that billions of dollars of natural gas is locked in a layer of rock called Marcellus Shale that runs about a mile underground from upstate New York down to Virginia, including the northern tier of Pennsylvania. Only recently have technological advances and higher energy prices made extracting the gas financially feasible.

Speaking during a meeting Wednesday evening at the Tunkhannock Area High School, the Harveys Lake native said oil companies aren’t yet interested in crossing the county border. He said his family’s land in Wyoming County has been leased, but companies have refused to consider contiguous land across the county line.

However, Chris Robinson, who is brokering leases in Wyoming County for nearly $3,000 per acre and 17 percent royalties, said he’s already leased the western edge of Fairmount Township in northwestern Luzerne County.

Sordoni added that Dallas, Lake and Franklin townships are areas “Chris and I are hearing (about) repeatedly” and are “still very much prospective and in play.”

Luzerne County landowners anxiously awaiting a lease offer probably won’t have to wait long for an answer. Robinson, who’s from Allegheny County, said he planned to continue negotiating leases in the area until the gas companies are no longer interested.

“I don’t think it’s going to take that long. It’s measured in months at most,” he said.

The wait might, however, offer local landowners examples to consider. Unlike other land groups, the Wyoming landowners rolled all their concerns into the lease instead of adding addendums.

“The difference is this is our lease. This is about us,” said Chip Lions, a member of the group who’s now doing lease work.

The meeting was sponsored by Stone House Wealth Management LLC, a Montrose-based financial planning firm that’s advising landowners and selling them investment portfolios. The company, which started the www.nepagas.com Web site, got involved a while ago “because we saw where this was going to go,” said John Burke, an investment adviser with the company.

The good news, Robinson said, is that he can get leases for any property within the companies’ interested regions, no matter the size.

“I can’t tell you how many I’ve signed for 1 acre or less,” he said.

Additionally, he said that while some gas companies might honestly stop leasing, other companies new to the area desperately want in on the drilling rights. And, he said, they can check for clear land titles within five days, contrary to the three months they tell most land groups.

For landowners concerned about environmental problems, he said state agencies are good at watching drillers, noting his own enforcement experiences.

He warned, however, to not go it alone.

“The mass of ground gets people the best deal, period,” he said. “People who break away, you may be penalized and you may be penalizing your neighbors.”

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

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

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

School districts that sign a lease will receive money per acre, royalty checks on a regular basis.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

There are school superintendents who would drool over the windfall Bill Bush received around January. But Bush, the superintendent at Elk Lake School District, is looking for an even bigger payday.

The district essentially made $127,500 for nothing when it signed a gas lease earlier this year for its 170 acres in Susquehanna County. The district received $750 per acre and royalties of 12.5 percent.

With lease offers hovering around $2,500 per acre in some areas, the deal doesn’t seem as equitable as it once did.

“We were excited at the time, but not now,” Bush said. “I think anybody who signed a lease prior to today probably wishes they had waited.”

Still, the district jumped on the offer, he said, because the company assured it would drill a well on district property, guaranteeing the district a handsome royalty check on a regular basis.

With a furor building over the potential of the natural gas reserves locked in a rock layer that stretches from New York to Virginia, the decision is one that many school districts in the area might have to soon consider. Bush said he believes Elk Lake is the first district to sign, but others aren’t far behind.

Tunkhannock Area School District recently agreed to join a group of Wyoming County landowners who are negotiating a gas lease. Dallas School District is also discussing lease options.Bush said Cabot Oil and Gas Corp. is planning to have a well online by the 2009-2010 school year. It’s unclear how much the district stands to gain from royalties, but surrounding areas “indicate strong reserves,” Bush said. “If we’re consistent with what the project is locally, it would certainly be beneficial to the district,” he said.

So far, Elk Lake is attempting to ignore its financial good fortune, Bush said. The money it already received went to the general fund and disappeared in the district’s almost $17 million annual budget. Instead of counting down the days until royalties start rolling in, people in the district are looking at them as an unexpected bonus if they come.

“I think everybody’s kind of reserving judgment to see how it comes out,” Bush said. “I think they’ve remained grounded.”

Bush has modest plans for the funds, such as building and grounds maintenance and upgrading technology.

Beyond the royalties it would receive from drilling, the district retained the rights to 200,000 cubic feet of gas each year, which it could use or sell at market price. At prices calculated by the federal Energy Information Administration, the district would make about $1,500 from its yearly allotment. The district is considering switching from its oil-fired heating system to a natural gas one, Bush said.

The district also reserved other land rights in about two dozen addendums to the lease.

“Environmental concerns were first and foremost,” Bush said, but safety and other issues were included.

Beyond the royalties, the district retained the rights to 200,000 cubic feet of gas each year, which it could use or sell at market price.

Copyright: Times Leader

Energy resource below Appalachia in four states seen as possible boon.

GENARO C. ARMAS Associated Press Writer
STATE COLLEGE — More than a mile beneath an area of Appalachia covering parts of four states lies a mostly untapped reservoir of natural gas that could swell U.S. reserves.

Geologists and energy companies have known for decades about the gas in the Marcellus Shale, but only recently have figured out a possible – though expensive – way to extract it from the thick black rock about 6,000 feet underground.

Like prospectors mining for gold, energy executives must decide whether the prize is worth the huge investment.

“This is a very real prospect, very real,” said Stephen Rhoads, president of the Pennsylvania Oil and Gas Association. “This could be a very significant year for this.”

The shale holding the best prospects covers an area of 54,000 square miles, from upstate New York, across Pennsylvania into eastern Ohio and across most of West Virginia – a total area bigger than the state of Pennsylvania.

It could contain as much as 50 trillion cubic feet of recoverable natural gas, according to a recent study by researchers at Penn State University and the State University of New York at Fredonia.

The United States produces about 19 trillion cubic feet of gas a year, so the Marcellus field would be a boon if new drilling technology works, Penn State geoscientist Terry Engelder said.

“The value of this science could increment the net worth of U.S. energy resources by a trillion dollars, plus or minus billions,” he said.

The average consumer price for natural gas in the United States is forecast to rise 78 percent between the 2001-2002 and 2007-2008 winter heating seasons, which last from October to March. Prices will go from $7.45 to $13.32 per thousand cubic feet this season, according to the federal Energy Information Administration.

That translates into the average season bill nearly doubling during the same period from $465 to $884.

One of the main players in Pennsylvania, Range Resources Corp., of Fort Worth, Texas, has roughly 4,700 wells statewide – though it’s the results from five new horizontal wells in southwestern Pennsylvania that have company executives especially hopeful.

The company, in a December financial report, estimated that two horizontal wells are producing roughly 4.6 million cubic feet of gas per day. Tests on an additional three recently completed horizontal wells showed potential for a total of 12.7 million cubic feet of gas per day.

“We’re extremely encouraged. We see many viable parts of the Marcellus that will be commercial,” said Range Senior Vice President Rodney Waller.

Yet he cautioned it was still too early to determine how successful the venture could be because of limited data.

The upfront money may give some pause to prospectors. A typical well that drills straight down to a depth of about 2,000 to 3,000 feet costs roughly $800,000.

But in the Marcellus Shale, Range and other companies hope a different kind of drilling might yield better results – one in which a well is dug straight down to depths of about 6,000 feet or more, before making a right angle to drill horizontally into the shale. That kind of well could cost a company $3 million to build, not counting the cost of leasing the land, Engelder said.

So the multimillion-dollar question is whether that technology can consistently release the gas from the layer of rock hundreds of millions of years old.

Scientists had long thought the Marcellus served as a source perhaps for shallower wells dug by conventional drills. Previous attempts to extract gas conventionally from the Marcellus haven’t led to much success.

According to Engelder, a series of seams, or fractures, in the rock could hold the key.

Drilling horizontally into this matrix could help give the gas an outlet to escape, said Engelder, a principal owner in Appalachian Fracturing Systems Inc., a consulting firm to gas companies.

Homeowners are intrigued, too. About 80 people packed into a lecture hall at Penn State Wilkes-Barre for a gas drilling information seminar sponsored by the university’s cooperative extension.

People such as Carl Penedos, who owns 150 acres of Wyoming County, relayed stories of gas company representatives knocking on the doors of neighbors seeking to lease land. A couple of neighbors recently signed leases for $50 per acre per year, while others have been offered $500 per acre, he said.

The homebuilder said he was also concerned about the potential environmental impact of drilling.

Copyright: Times Leader