Dan Hust | Democrat THIS PUMPING STATION sits on about an acre of land covering the Tennessee Pipeline in Susquehanna County, Pa. - a line similar in size to the coming Millennium Pipeline in Sullivan County.

Tour offers glimpse of gas future locally

By Dan Hust
SUSQUEHANNA COUNTY, PA — Februrary 15, 2008 — More than 60 members of the Northern Wayne Property Owners Alliance paid a visit to several Susquehanna County, Pa. properties last week to learn more about natural gas drilling and distribution operations.
Gas companies and their representatives have been pouring into Wayne County, Pa. to repeat the successes they’ve found farther west, and now they’re eyeing Sullivan County as the next frontier. And according to geologists, they just might find tremendous reserves of natural gas thousands of feet below residents’ properties.
What has happened in Susquehanna County could very well portend the future of this area. Following are highlights of the daylong tour:
• Farmer Jim Greenwood has a well being drilled on his 300 acres, expected to be in operation by June.
More than 7,500 feet beneath the surface, salt water and sand are being pumped through the Marcellus shale bed to make the gas more accessible, calling fracing. Large water tanks sit on about half an acre of Greenwood’s property (a total of four acres are in use), and a truck visits fairly often to cart away the tanks that are full of used water and sand. No dangerous chemicals are being used by the drilling company, called Cabot, and all operations must be conducted at least 300 feet away from residences.
“We didn’t think this was going to happen,” said Greenwood, who leased his land for just $25 an acre a year ago (prices in Wayne County are now up to $750 an acre). “Three months later they were here with a four-wheeler identifying well sites.”
Cabot built a gravel road a quarter-mile into his property at his own expense and will soon build a small concrete pad around the near-seven-foot-tall wellhead, from which a hissing sound was emanating. It was not gas (though in its natural state, gas is odorless and colorless) but the result of the water pressure from the fracing process.
Nearly every day, state environmental officials have been on site, observing operations and conducting air-quality tests. Greenwood said that all garbage has been removed and that his nearby drinking water well is unaffected (though he admitted he has not tested the water for contaminants).
When operational, the well is expected to produce enough of a profit to earn Greenwood $10-$20 per acre per day. That figure will vary because a gas well’s output changes by the hour. No checks have been received yet, however.
There is no guarantee the well will produce anything, though up to 20 more wells are being drilled on other properties within a two-mile area (every neighbor has signed a lease).
If gas is found, however, Greenwood’s five-year lease arrangement with Cabot becomes permanent until the gas is depleted. While Greenwood regrets not coming to an arrangement for drilling fees (which can range from hundreds to tens of thousands of dollars), the lease does not permit drilling beneath 10,000 feet, where oil deposits may exist.
A six-inch line leads off the wellhead to a 10-inch pipe that takes it to an underground storage facility about a mile away. From there it travels to the Tennessee Gas Pipeline, similar in size to the Millennium Pipeline being built in western and southern Sullivan County.
Greenwood’s tax assessment has not changed, and he doesn’t expect it to, saying the local assessor looks at it as a “temporary disturbance.”
Though Greenwood admitted there’s “a lot of stuff we haven’t looked into,” the 40-year-old expects to retire from farming but keep his job with a nearby Proctor and Gamble plant, which manufactures Bounty paper towels.
• Farmer Dennis LaRue has several wells being drilled 6,000 feet down on his 687 acres, for which he received $50 an acre for signing a five-year lease with the Epsilon Energy company a year ago – even with the land being a conservation subdivision.
The wells are close to becoming operational and will be drilled 4,000 feet horizontally in addition to the vertical depth. LaRue is expecting a total of nine wells to be drilled if the gas reserves are as significant as anticipated.
LaRue is getting the standard 1/8th royalty but got paid $500 for the drilling site itself, to which Epsilon built its own network of gravel roads.
“They treated me really well,” he remarked inside a shed built with some of the funds from the lease (which is paid upfront).
He wants to continue farming and expects in the fall to put cows back on the pastures where the wells have been drilled. And as far as taxes, “this is treated just like a rental,” LaRue explained.
Like Greenwood, this seventh-generation farmer didn’t think the gas companies were serious, as his family possesses never-consummated gas leases dating back to 1959.
He urged local landowners to take these offers seriously, noting that America is one of the few countries in the world where property owners also possess the mineral rights.
“You people really have an opportunity to take things over,” he said. “You invest nothing, and if they find nothing, you lose nothing.”
• Northern Wayne Property Owners Alliance leader Marian Schweighofer noted that neither of these farmers included the so-called Pugh Clause into their leases, which would have limited to just the well site the amount of land locked in by the gas company.
While that can easily be put into a lease, she cautioned that Pennsylvania’s “rule of capture” law still applies, meaning that any gas above approximately 6,000 feet can be acquired by a gas company even if that gas is located beneath a property with which it does not have a lease agreement. (A gas company cannot drill on land that it does not own or lease, however, and New York State avoids the whole issue through “compulsory pooling,” meaning that even landowners unwilling or uninterested in making a deal with a gas company remain entitled to royalties for any gas withdrawn from underneath their land.)
After revealing that the Pa. Game Commission recently leased some of its lands to gas companies in exchange for a whopping 29 percent royalty, Schweighofer said at least one company – Chesapeake Energy – had granted “most favored nation” status to some landowners. Such a designation means that if Chesapeake signs a lease with a neighboring property for a higher amount, it will match that amount in existing leases (though it is incumbent upon the landowner to determine what terms his/her neighbors are coming to).
• The tour also visited a pumping station on about an acre of fenced-off land along the Tennessee Pipeline.
While equipment generated a low “whoosh” from inside a small building, a neighbor named Angela said the only issue was an occasional smell, since the station is where perfume is added to make gas leaks noticeable in pipes and buildings.
She said that residents had been evacuated only once in 25 years of operation, though she said nothing resulted from the “nonsense.”
The station is on leased land and features one building and several exposed tanks, pipes, vents and a small radio tower.
• The Northern Wayne Property Owners Alliance is not only seeking to negotiate leasing and royalty deals for member property owners but also to get a discount on water tests for those who want them.
In Sullivan County, the Sullivan-Delaware Property Owners Association is revving up to do the same thing, though founder Noel van Swol of Long Eddy said the organization is about 2-3 months behind its Pa. sister.
The goal, however, is the same: “to get the best possible deal for every property owner in the region,” he said.
For more information, contact van Swol at 887-4728 or Cornell Cooperative Extension at 292-6180.