Hancock Gas Lease

Community for Hancock-area land owners interested in gas leasing

Earlier this year, geologists were telling us that the Marcellus Shale is huge — that it could supply enough gas to supply the entire USA for two full years. Experts now think that estimate may be incorrect: it could contain seven times that much! As reported in Forbes:

Penn State University geoscientist Terry Engelder said in a phone interview Monday that he now estimates 363 trillion cubic feet of natural gas could be recovered over the next few decades from the 31-million-acre core area of the Marcellus region…

“It has the potential to be the biggest gas field in the United States,” John Pinkerton, chairman and chief executive of Range Resources Corp., said last week in an interview at the Fort Worth, Texas-based company’s office in western Pennsylvania.

Engelder first presented his new numbers in Pittsburgh last week at a conference on Appalachian gas sponsored by the energy information firm Platts. He said he based his revised estimate on new figures from Chesapeake Energy Corp., the nation’s largest natural gas producer.

So you signed a lease. That doesn’t mean you can sit back and wait for the money to roll in. Just as with signing the lease in the first place, the oil companies are likely to push you as far as they can, and maybe a bit more, so you need to know what your rights are. At the same time, everyone wants a piece of what money you do get (look at the efforts in Pennsylvania to assess property taxes on the well).

It turns out that there’s an organization for you, champion your cause. The Wellbore Log writes about it:

What is NARO? This spring I did a Google search, looking to see what organizations exist across the nation that represent Lessors and their interests to gas companies and local, state and national governmental agencies. The main organization that came to the top of the list is The National Association of Royalty Owners (NARO). So one day I called Mr. Jerry Simmons, Executive Director of NARO and had a nice chat about the needs of landowners in Pa and the NARO organization. NARO is the only organization that represents exclusively the rights of mineral and royalty owners. It was quickly evident that as new Lessors in PA, we have no clue as to the issues that are facing us as royalty owners. So I kicked in my $105.00 and joined, looking to learn more from the experienced royalty owners and in the hopes a Pennsylvania Chapter would be formed.

NARO’s web site is located at http://www.naro-us.org. HancockGasLease has no association or even experience with NARO, but it does seem worth investigation.

The town of New Lisbon has instituted a 6-month moratorium on gas drilling. The Daily Star reports:

In the next half-year, New Lisbon officials will study how gas drilling has affected other towns and individuals, including wear and tear on roads, threats and aquifers, [Supervisor Robert Taylor] said. …

The town’s initiative, which came Tuesday, does not mean that New Lisbon is outlawing exploration for and extraction of gas from the shale that underlies most of the area, said the town supervisor.

It’s not clear to us how a 6-month moratorium can do anything but outlaw extraction of gas. Whether or not you think that’s a good thing is another question

One of the primary concerns about gas drilling has been where they’ll get the phenomenal amount of water necessary to drill each well. In order to ensure that our water resources — some of the region’s greatest assets — aren’t abused, the state DEC is seeking authority over the withdrawal of water in places where it’s not already regulated. As reported in the Albany Times Union:

DEC wants power to control water withdrawals in parts of the state not covered by either the Delaware or Susquehanna river basin commissions, which already have power over the water needed by drillers, [DEC Commissioner Pete] Grannis said.

“We will be seeking clear regulatory authority,” Grannis told members of the Assembly Environmental Conservation Committee. …

Grannis said that DEC also will require that companies disclose the drilling chemicals used, something [that] has not be[en] required in other states.

Small-scale hydrofracking has been done since the 1940s in the state without a single documented instance of water contamination, said Rick Kessy, manager of operations and engineering for Fortuna Energy of Horseheads, Chemung County.

The gas companies buying leases aren’t always expecting to drill wells. They also need a means to get the extracted gas to consumers. That means pipelines, and those pipes need to run somewhere. If you think that a gas well is going to make you you money, you should be sure what your lease sells about the use of the land for pipeline rights of way.

Advice from Tom Murphy of the Penn State Cooperative Extension:

If the leases allow the company unrestricted access to the properties in the proposed ROW, they have the green light to move forward without additional negotiation on price. But if the lease(s) have addendums indicating the company would have to return to the landowner to strike a separate deal on the ROW, then the company will be approaching you to broker an arrangement. If that is the case, they will normally offer you an easement agreement that includes a number of provisions and payment terms.

The width of that easement is normally 30 feet but companies often will ask for additional work space ranging up to 30 additional feet for a total of 60 feet of width. Keep in mind if the ROW is being developed through a wooded area with marketable timber, you need to determine whose timber it will be upon purchase of the ROW, who will place value on the timber, and if it reverts to you, where will it be placed after it is cut and stacked. If your lease allows, you should get a third party forester who will make a determination of the fair market value of the timber before it is cut.

Another important consideration with pipeline is during the actual construction phase. Always make sure the double ditch method is agreed upon to be used when the excavation is started. It is always important for the topsoil to be separated and saved apart from subsoil. And when the site is re-graded, the topsoil needs to be placed back on the surface, not used to bed the pipe.

As reported in the past, Chesapeake has slowed its pans to a much slower pace than originally expected. They’ve now announced some specifics about their Marcellus plans, reported in the Fort Worth Business Press:

The Oklahoma City-based company will reduce drilling and leasehold expenditures to meet the mark, and said it also expects to generate at least $2.5 billion from the sale of a 25-percent interest in its Marcellus Shale holdings, according to an Oct. 10 statement. Investment in the company’s midstream operations also is sought.

Furthermore, Chesapeake Energy will reduce its rig count to between 135 and 140, and will keep that count flat through 2010…

The Times Tribune provides some analysis:

“The industry as whole spent too much on land,” Subash Chandra, an analyst with Jefferies & Company Inc. of New York, said. “Generally speaking, the speculative land bubble is over.” That does not mean, however, that Chesapeake and other natural gas companies are ending lease activity altogether.

Answering the recent calls for banning all drilling near the watershed, the Delaware County Board of Supervisors has voted on a resolution countering the NYC DEP. As reported in The Daily Star:

“If we are going to get energy-independent, we have to start somewhere,” [Colchester Supervisor Bob] Homovich said. “The whole history of this area is that we have lived off our natural resources, and this is no different.”

Homovich said natural-gas drilling is an opportunity to improve the well-being and lifestyle of everyone in the county.

“When the tide goes up, all boats rise,” Homovich said.

Homovich charged that the DEP doesn’t want economic growth in the watershed, and the sale of gas leases will “knock the city’s land-acquisition program right in the head.

Deposit Supervisor Thomas Axtell said the county’s Watershed Affairs Committee, of which he is a member, brought the proposition to the board to point out that if the DEC allows the city to impose additional regulations, the agency is violating its own environmental law.

The county contends that if the DEC supports a drilling ban on all watershed lands within a mile of resevoirs…, then DEC is in violation of its mandate to efficiently utilize the state’s natural resources.

In that case, it could be liable to provide funding to landowners in the watershed to compensate for lost income opportunities.

A segment on NBC World News discusses our situation. There’s nothing new hear, but you can see some pretty pictures of the Upper Delaware area, as well as see what Noel Van Swol looks like. Click here for video.

Thanks to Kilgour Farms for the link.

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