Getting a natural gas lease offer in the mail is a sure sign that the Marcellus Shale natural gas leasing boom isn't over in your area. And landsmen offering such deals would like you to think that you have to snatch up their deal of, say, $1,800 an acre signing bonus plus a 12% royalty.
But as one gas leasing consultant working on landowners' behalf responds: "$2,500 and 17% would be a more realistic starting point. You're being low-balled. Recent bonus offers in certain areas have been as high as $3,200. "
Horizontal hydraulic fracturing or "fracking" technology unearthed the gas-producing potential of the Marcellus formation. More importantly, as Chesapeake Energy's CEO Aubrey McClendon recently revealed, gas yields of drilled horizontal wells have exceeded projected yields. Formations, once too costly to drill, have become profitable for exploration, he adds.
That's why older oil and gas formations are being explored or re-explored. They include the more massive Utica shale, plus the Devonian Black shale, and even the Herkimer, Oneida and Vernon sandstone formations. These stacked plays in the Appalachian Basin may produce multiple natural gas pay zones. That's why it's hugely important that leases specify what formation or formations are to be tapped.
Geology. com reports that the Utica shale is geographically larger than the Marcellus formation. Its depth varies considerably, from being deeper than the Marcellus in western Pennsylvania to replacing the Marcellus through central New York State and into Ontario, Canada.
Exploration issues vary by state
A host of legal and environmental issues have governed the intensity of natural gas development. Pennsylvania and West Virginia, for instance, opened the door early to gas exploration. Maryland and New York put a hold or moratorium on horizontal drilling as the states geared up efforts to police water quality issues. Drilling permit activity is beginning to ramp up in Ohio.
Pipeline development issues also complicate expansion. In late May, the Pennsylvania Public Utility Commission granted public utility status to the Laser Northeast Gathering Company, giving it eminent domain powers to acquire land to construct pipelines in northeastern Pennsylvania to New York. Another pipeline expansion project by the Tennessee Gas Pipeline, is also raising landowner complaints in Northern New Jersey about an easement taking.
Dissenting PPU Commissioner James Cawley warned that conferring the power of eminent domain "upsets the negotiating balance between landowners and pipeline operators over rights-of-way or easements, with grave implications for the individual Pennsylvanians . . . given the enormity of shale gas extraction underway in the state."
Useful online landowner resources
A host of web sites offer useful information for landowners. Here are a few of the sites:
• Before you jump at an offer, read the 10 biggest landowner mistakes offered by attorney Doug Clark, The Clark Law Firm, Blakely, Pa., at Biggestmistakes.
• Penn State University has a host of publications and resources on Marcellus Shale gas exploration available at PSUMarcellus.
• Geology.com has an extensive site devoted to the Utica shale at Uticashale.
• Marcellus Drilling News, an electronic newsletter for landowners, can be found at: Marcellusdrilling.