Gas lease proposal: “You may already be a sucker!”

gas lease proposal 1

gas lease proposal 2

gas lease proposal 3

Alert readers will have already discovered several amusing things about this missive, which arrived unsolicited in this morning’s mail:

  • Though purporting to be a lease proposal for Blair County in the subject line and first paragraph, it references the neighboring Cambria County in the “terms and conditions.” One might take this for a simple copy-and-paste error, except that the reference is specifically to the “initial bonus consideration” of $500.00 per acre. I’m not a lawyer, but it doesn’t take a whole lot of imagination to picture them saying, after one had already signed such a proposal in great anticipation of instant wealth (it would amount to over $300,000 for us), “Sorry, your land isn’t in Cambria County, so we don’t owe you anything!”
  • “The royalty rate in the lease will be 1/8.” Uh, 1/8 of what, exactly? More weasel words designed to trap the unwary — or just extremely vague/sloppy language from people who do this for a living?
  • It hardly takes any more time and ink to type “Carrizo” than CRZO, but the stock-ticker symbol is used throughout. Is this an attempt to garner respectability, to intimidate, or both?
  • “CRZO’s activity in the area” could be harmed by the disclosure of the terms. Gee, I can’t imagine how!
  • If not signed and returned by May 12, “the offer shall immediately become null and void.” OH NO, PAPPY, WE’RE SCREWED! QUICK, CALL ‘EM UP AND BEG FOR AN EXTENSION!
  • Despite being dated May 5, the letter is actually postmarked 16 May 2008.
  • The stamp cancelation text quotes John Adams: “Let us dare to read, think, speak, and write.” Yes, let’s.

The Google Finance page for Carrizo (linked above) makes note of their “acreage in shale plays in … the Marcellus in Pennsylvania/New York.” That is what’s at issue here: a deep deposit of natural gas that may be accessable from various parts of the Ridge-and-Valley geologic province, not just the Allegheny Plateau to our west and north where the shallower gas plays occur. As the New York Times put it last month:

A layer of rock here [in Pennsylvania] called the Marcellus Shale has been known for more than a century to contain gas, but it was generally not seen as economical to extract. Now, improved recovery technology, sharply higher natural gas prices and strong drilling results in a similar shale formation in north Texas are changing the calculus. A result is that a part of the country where energy supplies were long thought to be largely tapped out is suddenly ripe for gas prospecting. […]

Natural gas in the Marcellus and other shale formations is sometimes found as deep as 9,000 feet below the ground, a geological and engineering challenge not to be underestimated. The shales are sedimentary rock deposits formed from the mud of shallow seas several hundred million years ago. Gas can be found trapped within shale deposits, although it is too early to know exactly how much gas will be retrievable.

The Times article refers to the rush to sign leases as a feeding frenzy, and from what we hear, that’s not too far off the mark. Reportedly, some folks in Sinking Valley have already signed leases offering as little as $5.00 per acre! Other offers have gone as high as $600 per acre.

It probably goes without saying that we will never sign away any subsurface rights here on our property. In addition to very real concerns about groundwater contamination (Marcellus shale contains uranium), the main problem with gas drilling is habitat fragmentation. The Pennsylvania Department of Conservation and Natural Resources recently caved to pressure and opened up 75,000 acres of state forest land to gas drilling, reversing an earlier ban. Their claim is that the greater spacing between wells will lead to less forest fragmentation than would be the case with ordinary, shallow-well drilling, but environmentalists such as the Allegheny Defense Project’s Ryan Talbott, quoted in the linked article, respond that since the pads will be much larger, the difference is neglible. And it’s hard to see how more widely spaced clearings would reduce the number of roads and pipeline right-of-ways very much. Such linear corridors are the worst for spreading invasive plant species and giving access to nest predators on interior forest-dwelling birds, not to mention all-terrain vehicles (maybe that’s what the DCNR spokesflack meant by “other forest uses”).

Many interior forest species are already in steep decline, and it simply isn’t worth endangering them for what might be, at most, the equivalent of two years of total U.S. consumption if every recoverable cubic foot were exploited. We’re appalled that the official stewards of our state wildlands would consider trashing them to feed America’s fossil fuel addiction.

Well, people with dollar signs in their eyes are rarely given to honest discourse, be they state officials or “independent petroleum landmen.” But one thing is certain: geology-speak is really, really cool.

Bedding in the Marcellus is moderately well developed and fissile. Its upper reaches are marked by anoxic dark shales which indicate the Kačák Event, a late Eifelian stage marine anoxic event also associated with an extinction event. […]

The black and gray shales of the Hamilton Group mark the first terrigenous sediments deposited by the erosion of the Acadian Mountains. These sediments were deposited in the Acadian foredeep basin early in the Acadian orogeny, as part of a deep water sequence that continued to form the overlying Brallier Formation and Harrell Formation. The Marcellus Shale was formed from the very first sediments deposited in this very deep, sediment starved, anoxic trough. The dark shale is composed of flysch, a fine mud deposited in the deep water, burying the underlying Onondoga limestone beds.

It would be nice if the Kačák Event were the last extinction to be associated with these deposits.

–Dave

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About Dave Bonta

I'm the author of several books of poetry, including Ice Mountain: An Elegy, Breakdown: Banjo Poems, and Odes to Tools, but my real work is at my long-running literary blog Via Negativa, where I'm currently creating erasure poems from every entry of the Diary of Samuel Pepys. I'm also the editor and publisher of Moving Poems, a blog showcasing the best poetry videos on the web.

Posted on May 19, 2008, in conservation, forest health and tagged , . Bookmark the permalink. 11 Comments.

  1. There’s a lot of this going on in north Alabama too. I’m surprised at the number of folks who’ve said “yes” to the gas people.

  2. Well, it’s a lot of money. And people who own big chunks of mountain land are often not terribly wealthy. In our case, the payout minus royalties would amount to over five times our combined annual income.

  3. My folks bit this bait. I have photographed the scars and they are heinous.

  4. I wish they’d do some drilling around here. Isn’t that terrible? I’d like to know what’s down there. Very interesting to read a bit about the Devonian extinction theories. At first blush one never knows who one is meeting on the internet, if they are a crank or not, but I googled straight to a site with a hypothesis that the invention of greater trees led to creation of soils that somehow (I couldn’t comprehend the mechanisms) caused a release of CO2 that killed life in the shallow seas, which left me wondering if a scientist’s choice of theories is rooted in sensibility, in this case an aesthetic of irony. The Devonian Plant Hypothesis.

  5. I had been intimidated into signing a gas lease in 2003. I now find out about the illegal tactics that the landman used. I also now witness how they conduct their business. My question is how do I void this contract that seems unvoidable, to me?

  6. I don’t know, but if you live in Pennsylvania, I think folks from the Cooperative Extension Service may be able to help you. According to this article, they’ve been holding meetings with landowners all over the state.

  7. Gas drilling pondered
    Altoona City Authority stands to earn millions by allowing wells on land

    By William Kibler, bkibler@altoonamirror.com POSTED: June 20, 2008

    Article Photos: The Altoona City Authority may allow gas drilling on land in its watershed, including this embankment on Old Route 220 between the Grazierville bridge and the exit for Interstate 99. (Mirror photo by Patrick Waksmunski)

    http://www.altoonamirror.com/page/content.detail/id/508488.html?nav=742

    The Altoona City Authority may allow drilling of natural gas wells on its watershed to earn tens of millions of dollars, a practice that could offset the cost of a mandatory upgrade of its sewer plants to clean up Chesapeake Bay.

    The authority has 6,700 acres of watershed that could be available for extracting highly pressurized gas from tiny spaces and cracks in the 350-foot-thick layer of Marcellus shale more than a mile below the surface.

    The high cost of energy and new techniques for horizontal drilling and fracturing rock by pumping in high-pressure fluids have helped make extraction of gas practical from the Marcellus shale in Appalachia, which holds 168 trillion to 516 trillion cubic feet of the substance, according to a Penn State University Web site.

    About 20 oil and gas drilling companies from Texas are competing for leases on promising ground in Pennsylvania, said consultant Greg Myers of DMS Environmental Services of Bellefonte, who spoke to the authority Thursday.

    A couple of firms already have approached the authority, which asked Myers to develop a plan that could lead to a public request for proposals.

    The authority would receive payment through a bonus upon signing a lease and would receive royalties if wells produce.

    Bonus prices in Pennsylvania typically range between $1,500 and $2,000 an acre, said Ken Balliet, member of the Penn State Cooperative Extension’s natural gas exploration team, which is helping landowners deal sensibly with the rush.

    If the authority leases all its available land, it could earn $10 million to $13.4 million, tying up the land for five years — or if the company begins production, until production ends.

    State minimum royalty payments are 12.5 percent of gross well revenues, with some payments as high as 15 percent, Balliet said.

    If a company sets up 15 wells on the watershed, each one on a 400-acre tract, a modest output of gas could generate $6.6 million for the authority in initial royalties at the state minimum.

    Over 20 years, with declining output, those 15 wells could generate $54 million — a number easily within the area’s potential, though “highly speculative,” Balliet said.

    A 1972 test well drilled by Amoco not far from Bellwood Reservoir confirmed the Marcellus layer in the watershed is about as thick as anywhere in Pennsylvania, Myers said.

    Initially, a company would clear five-plus acres for each drilling site, set up a rig, get utilities in place and bring in up to 45 big trucks and 75 workers, Myers said. The drilling to reach the Marcellus goes on around the clock, taking up to three weeks.

    The hydraulic “fracturing” of the Marcellus requires large pumps and up to a million gallons of water and is loud and dirty, Myers said.

    When the well is ready for production, transmission lines are put in place, smaller ones leading to bigger ones leading to major distribution lines.

    The footprint of a well site and the width of the roadways needed to service it can shrink after the preparation phases are over.

    Because the gas is under high pressure, it comes to the surface — expanding to 300 times its volume — without the need for pumping, Myers said.

    The state Department of Environmental Protection regulates the operations, but the department hasn’t been able to handle the demands of the rush, so it’s important to build environmental protection into the lease, Myers said.

    That may mean sacrificing some income, Balliet said.

    The practice of horizontal drilling and the depth of the gas shale make it easier to minimize environmental harm, because it means more widely spaced well sites, strategically placed to suit the landowner, Myers said.

    Drillers protect groundwater by double-casing around a layer of concrete through the water table near the surface, Balliet said.

    The leases with the authority would need to stipulate that gas extraction wouldn’t interfere with windmill company operations.

    The authority must complete $40 million to $60 million worth of sewer plant upgrades as early as fall 2011 to meet nitrate and phosphorus standards designed to improve Chesapeake Bay.

  8. can you get out of the contract if you dont cash the check sign on money

  1. Pingback: Gas » Via Negativa

  2. Pingback: Horizontal gas drilling: perfectly safe as long as it isn’t in a watershed « Plummer’s Hollow, Pennsylvania

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