By Dick Miller (Part One)
WE CONNECT DOTS: Landowners in west central PA started getting lease confirmation checks about six weeks before Christmas. The payments, averaging, about $3,500 per acre, granted a well drilling company permission to extract oil and/or natural gas from beneath.
Six-figure checks have been arriving to the homes of large landowners in northern Mercer County, sending recipients to local banks. A researcher and advisor to this blog believes 20,000 acres in this region may have been leased, triggering $60-70 million in bonus payments.
Drilling and extraction of the natural gas must overcome another set of hurdles, however.
Wells being drilled now will continue to be classified as exploratory. Full extraction is not possible until pipelines are in place to deliver the gas to a collection point or (hopefully, eventually) a processing plant that Shell might build in Beaver County. This is where the gas could be processed in 2016 into various products including resin to make plastic items.
The first step to wealth for landowners, currently underway, is signing of a lease for mineral rights. New technology permits drillers to bore vertically a mile and beyond. Then they drill ninety-degree angled out horizontally in another direction.
This has laid bare huge quantities of natural gas in an area comprised of southwestern New York, Western PA, Eastern Ohio and northern West Virginia. The Marcellus Shale cache of natural gas is a bit over a mile down and an even richer accumulation may lie below that in an area known as the Utica Shale.
Facts are difficult to come by. The drillers are large corporations with legions of lawyers and communication specialists. Information is released only when the drillers deem it necessary to advance their interests.
The media in West Central PA asks no questions. Three newspapers owned by Alabama-based CNHI have ignored events that are part of the natural gas drilling story. Reportedly, a meeting several months ago, attended by several hundred land owners at a midway point between two of the papers was covered by neither. Both newspapers have strict limitations on overtime due to CNHI’s ongoing cash problems.
Landowners, hungry for information, have turned to a web site, www.gomarcellusshale.com. Lawyer Keith Mauck controls the site through his American Energy Communications, LLC. He also publishes three other websites that present data on other shale formations around the country.
He claims “an online grassroots network of over 75,000 people who are dedicated to safe and responsible exploration and production of domestic shale gas and shale oil.” Mr. Mauck believes (his network) is “central to easing our dependence on foreign oil.”
The Marcellus website is organized into county chapters in the four states where the formation is located. Pennsylvania and Ohio get the most attention because exploration efforts are most intense. Western PA counties and the number of website members are:
Butler (242), Mercer (210), Venango (154), Washington (147), Greene (126), Clarion (125), Beaver (124), Crawford (105), Westmoreland (99), Fayette (87), Warren (8) and Lawrence (0).
As a comparison, five counties with separate chapters in southern New York only have a combined membership of 111.
Finally, for this column, there is one more sub-story. The rent for two-bedroom apartments in Bradford County shot up from under $300 monthly to more than $1,000 in the period 2007-2011. Penn State researchers claim “natural gas drilling has generated more than $160 million in royalties for landowners in Bradford County.”
That was through 2011, but drilling activity in this New York border county has been scaled back in 2012. Natural gas prices plummeted to a ten-year low in April. Chesapeake is the dominant driller in Bradford County. Reporter Scott Detrow, of website StateImpactPA, wrote that Chesapeake began to “re-interpret” drilling leases. Chesapeake argued heretofore unreferenced contract language allows for further cost reductions.
In addition, the rich wet natural gas buried beneath northern Mercer County, coupled with Shell’s announcement to build a processing plant, began to attract more attention.