Shale leasing coalition

http://ccountiescoalition.com/

Tube forest

The Mothers' Day compost pile is about 2/3 gone. We've planted and mulched with it and can hear the happy plants singing. We haven't gotten the transport bill for this pile but are wondering if we should order another truck load. Father's Day is just around the corner.

The locusts that we put in last year are now tubed with the new mesh tubes that let more air and wind into the tree so they don't grow as fast but grow stronger while still being protected from the deer. They still need to be sprayed for weeds and mulched. We bought the tubes and bamboo stakes from BenMeadows, a forestry resources catalog, as much like Lowes as Walmart is like Neiman Marcus. Just the line of tubes may make an effective snow fence.


This is the new black walnut plantation in the lower back meadow. There's not much room to plant more. The Baron promised to take a year off next year from ordering more seedlings from Penn Nursery. Even if the price is irresistible, bundles of 100 is too many trees to plant.

On the gypsy moth front, on an inspection tour close to the house tonight we saw lots of 3/4" caterpillars in the inverted V. We've had 4 great days of eating weather so perhaps they've feasted on Bt and have exploding guts although ultra violet rays from the sun reduce the activity of the material to less than half after 48 hours and it can take 10 days to kill substantial numbers. Ours seem to be at the right size. Tim Cole suggested that the weather has been good for a collapse.

Other news from the Barony includes the gas and oil leasing companies that are courting Centre County. We are looking to pool our acres to get a better negotiation. For now we are watching Natural Gas Lease Forum to see what is happening around our area.

Sunday, May. 25, 2008
NATURAL GAS RUSH
Anne Danahy and Jennifer Thomas- Centre Daily Times
Snow Shoe Township resident Don Morgan thought $200 an acre for gas rights to his 48-acre property sounded like a good deal, especially compared with the $3.50 an acre he gets each year under a soon-to-expire lease.


A natural gas well is drilled last week along State Line Road north of Snow Shoe. According to the state Department of Environmental Protection, 4,183 wells were drilled in the state in 2006, up from from 1,354 in 2000.


Then he heard about other landowners getting offers of $600, $800 and even $2,500 an acre in some places.


“I don’t feel like I was ripped off, but you feel like you got left out,” said Morgan. “I did what I thought was the right thing at the time.”


He’s one of many Pennsylvania residents flooded with offers from gas companies combing the state in hopes of tapping into gas reserves.


Natural gas is a hot commodity. Demand is climbing for energy — particularly clean-burning energy that doesn’t have to be imported — and natural gas prices have increased sharply, if not steadily.


And recent research opened the door to the possibility that an area stretching from southern New York through western Pennsylvania and into Ohio and West Virginia contains vast amounts of natural gas in a layer of rock known as the Marcellus shale.


It’s led to something of a “gas rush.”


According to the state Department of Environmental Protection, a record-setting 7,297 gas and oil drilling permits were processed in 2006, a 21 percent increase over 2005. The number of wells drilled climbed from 1,354 in 2000 to 4,183 in 2006.


Specialists with Cooperative Extension have been holding meetings across the state in an effort to let landowners know what factors they should consider before signing away their gas rights. Tom Murphy, Lycoming County Cooperative Extension educator, said about 13,000 people have participated in the seminars so far. He said interest has been growing as companies are looking at drilling into the Marcellus shale.


State College-based Rex Energy is snapping up natural gas rights to properties in northern Centre County and Clearfield counties in hopes of capitalizing on that, said CEO Ben Hulburt.


“This has the potential to really change Pennsylvania’s economy in the next several decades,” he said, positioning the state as a leader nationwide in natural gas.


Hulburt said Rex has leases signed for 20,000 acres, a figure he hopes to double by year’s end, with $60 million dedicated to leasing acreage in the Marcellus shale in Pennsylvania


What makes the find so interesting to companies is that it taps into a new well of natural gas that previously had been inaccessible, he said.


Companies had previously relied on natural gas that had seeped up into sandstone layers above the shale. Sandstone is permeable and easier to tap, he said.


But new technology is available that fractures the shale with a substance such as water, and frees the natural gas from the ground, Hulburt said


“It’s these cracks, these fractures that allow the gas to flow,” he said.


The shale in Centre and Clinton counties is between 100 and 150 feet thick, while in other areas it can be as much as 250 feet thick, he said.


He said Rex has drilled two vertical test wells into Marcellus to about 8,000 feet. He expects the Marcellus wells to cost about $4 million compared to about $200,000 for shallow wells. Rex could drill between 30 and 40 wells a year if it pans out.


“We’re very pleased with them,” he said, adding that the company is not commenting beyond that at this time.


Letters for leasing


Hulburt is not alone in his search for natural gas locally.


Many landowners in the Snow Shoe area received a letter in May from a Minnesota company inviting them to consider leasing their oil and gas rights.


“Your participation will enable you to share in the profits of this venture,” reads the letter from Western Land Services Inc.


Congressman John Peterson also thinks natural gas drilling is set to become a bright spot in the local economy amid a growing global energy crunch.


“I think Pennsylvania will become an energy state. A major energy state,” he said.


It comes at a time when more than 62 percent of homes are heated with natural gas, and prices are expected to climb another 40 to 50 percent in the next year, he added.


Natural gas is used in everything including plastics, fertilizer and the production of ethanol, he said. And 17 percent of natural gas used in the U.S. is still being imported.


Peterson said Pennsylvania is poised to be the largest natural gas producer in the nation. “This is not a short term thing,” he said. “The industry thinks it’s for real.”


The discovery comes at a time when new potential supplies are declining. “The natural gas market in the U.S. gets tighter and tighter every year to find more natural gas,” Hulburt said.


The Marcellus discovery could change that and shift away from shallow drilling.


North Coast Energy, an Akron, Ohio, subsidiary of Exco Resources Inc., started drilling a well in Burnside Township in April in hopes of tapping into those reserves.


President Wendy Straatmann said the project will cost between $4 million and $5 million. It’s a slow process and North Coast likely won’t know whether it’s successful until late this year.


Straatmann said the drilling area is about 4.5 acres, but she sees the size of the area known as a drilling pad shrinking over time as businesses learn how to make them smaller.


“It costs us money to make them big,” she said. “It’s in our best interest to make them as small as we can.”


Once the well is complete, most of the site will be reclaimed with grasses and apple trees.


That’s little consolation to Dan Hall, of Snow Shoe.


The mineral rights to his property — like that of many property owners in that area — were sold before his dad bought the property, which he now owns with his brother and two sisters.


Two years ago, there were two wells on this property. Now there are five, two of which are less than 1,000 feet apart.


The past several years have been an ongoing battle with the gas companies that came onto his land to drill and left him with a patchwork of roads criss-crossing his woods and wells taking up about five acres of his land.


He’s been working toward a settlement with the gas company, but each time there’s an ownership change it seems further away, he said.


“It’s just really frustrating,” Hall said.


He urged those who still own their rights to be cautious in selling those rights.


“You’ll make a lot of money, but you’re basically selling your soul, I think,” Hall said.


Get it in writing, make sure documents outline what control you’ll have of the land and how they’ll leave the property, he said. Being involved from day one will help determine where roads, wells and lines will be located.


“They’ll promise you the world,” he said.


Problems with drilling


Rodney Preslovich, chairman of Snow Shoe Township Board of Supervisors, said widespread drilling has created problems for the township.


“We get a lot of complaints,” Preslovich said. “When the gas wells go in there, the upkeep of the roads is terrible.”


The Snow Shoe Borough Water Authority had problems too. In November 2005, the water level in one of its wells dropped, and it went from pumping 300 gallons per minute to about 225. The state Department of Environmental Protection found that the change was caused by drilling by Great Lakes Energy Partners LLC, now known as Range Resources-Appalachia LLC.


Range Resources denies causing the problem but has signed an agreement to notify the DEP and the authority before drilling within a mile of the well protection area. Authority President Gary Fox said he thinks that should be part of the standard regulations.


Fox said the company also agreed to pay about $40,000 to the authority to cover the estimated cost of addressing the water level.


Shane Barnyak spent almost a year negotiating the leasing rights for his 28 acres in Burnside Township about eight years ago, making sure addenda to protect his country lifestyle were added.


But he’s still learning the ins and outs. He declined to say what he was paid per acre for the lease. He has one well on his property, which pays him a 12.5 percent of royalty as per law.


“Hindsight is 20-20,” he said “We learned a lot in the meantime. We may have been able to do better.”


That’s what Cooperative Extension is trying to help property owners accomplish with the gas drilling workshops. Murphy said one of the most common questions landowners have is what should be added to a lease to make it more favorable to the property owner. Options include shortening a lease from 10 years to 5 years or taking out a clause that automatically extends a lease.


A lawyer can help a landowner with those negotiations.


Barnyak said it’s important to understand the consequences of owning a piece of land when someone else owns the gas rights.


“They have the right to go pursue that gas and oil,” he said.