Water withdrawl

Applications pending before the Susquehanna River Basin Commission from natural gas companies seeking to withdraw water from public sewer systems or the Susquehanna River in Wyoming County:

1- Chesapeake Appalachia LLC is seeking to withdraw water from the Susquehanna River Basin for natural gas well development in New York and Pennsylvania. The company expects to use 2.075 million gallons of water per day for the well development.
In New York, the natural gas well development will be in Tioga, Chemung, Steuben, Schuyler and Broome counties, according to Chesapeake. In Pennsylvania, natural gas well development will be in Susquehanna, Bradford, Wyoming, Sullivan and Wayne counties.

2- Chesapeake Appalachia LLC is also seeking to withdraw up to 999,999 gallons of surface water per day from the Susquehanna River in Mehoopany for natural gas well development.

3- Cabot Oil & Gas Corp. is seeking approval to obtain no more than 130,000 gallons of water per day from the Meshoppen Borough Water Company and Tunkhannock Borough Municipal Authority. Cabot expects to use the water for the development of natural gas exploration wells in Dimock and Springville.



Questions:
A) Does anyone have concerns about the proposed withdrawal (and use) of water from the river and municipal water systems?
B) Is there enough water to go around?

-- Josh Mrozinski

Severence tax rule No. 1.

Rule number one about severance tax, is that you never talk about severance tax.

Such is the case in Pennsylvania's oil and gas industry.

In researching Sunday's story on the Keystone State's lack of a tax that exists in all other major oil, gas and mineral producing states, I had conversations with a handful of company executives – very short conversations.

None wanted to go on record talking about or even alluding to the severance tax. If legislators and the general public aren't talking about a tax that would dip into their natural gas revenue, they sure as heck didn't want to bring it up.

Steve Rhoads, executive director of the Pennsylvania Oil and Gas Association, did address the issue even though his understanding of the tax structure in other states was a not complete.

A gas company executive did admit that, realistically, a Pennsylvania severance tax was coming, eventually. But he said the state needn't rush it into the books. The exploration of Marcellus Shale is in its infancy, he noted. The few holes that have been drilled are waiting for pipeline to collect the gas.

It could be three years until the gas is rising from Marcellus in large amounts, he said.

That gives legislators plenty of time to work out the fine print.

--- David Falchek

Gas Well Maps at Pagaslease.com

There is a great resource for visual learners, curious neighbors and anyone interested in tracking the march of gas exploration across the landscape of Northeastern Pennsylvania at pagaslease.com.

The landowners' forum site hosts a natural gas well mapper here. The page features four maps: one for Bradford, Susquehanna, Wayne, Wyoming and Lackawanna counties; one for the Southern Tier of New York state; one combined Pennsylvania and New York map; and one for the Haynesville Shale in Louisiana, Texas and Arkansas.

The maps use green markers to show where gas has been found, red markers to show where there are permits to drill, flags to show permits for a gas pipeline, P's to show current pipelines, and small yellow houses to show gas pipeline stations. The Google maps allow browsers to switch between political map, satellite map and terrain map views, so you can see the natural and man-made features in the area surrounding each proposed well site or pipeline. The site's authors also note a future feature of the maps: as Google updates its satellite images, the three- to five- acre well pads will be visible from the sky.

Click on the individual points and sometimes added information, like a May 25 photo of the drilling rig at the Lewis 2 well site, pops up.

The site is looking for help mapping areas. To volunteer, contact the well mapping team here.

Natural Gas Leasing Workshop in Clarks Summit

The Penn State Cooperative Extension is holding a workshop titled,
"Managing Natural Gas Lease and Royalty Income" on July 8 at the Newton Recreation
Center on the Newton/Ransom Blvd in Clarks Summit. The workshop starts 7 p.m.


The workshop costs $10 and will cover these topics:

- Ideas For Managing Your Gas Windfall

- Tax Consequences of Gas Lease and Royalty Income

- Gas Leases and Estate Planning

- Basic Steps to Investing Gas Income

For more information or to make a reservation call:
the Penn State Cooperative Extension office in Lackawanna County at 963-6842.



The Cost of the Workshop is $10.00 per person, payable at the door.

Is natural gas real estate?

A bill introduced in the Pennsylvania House of Representatives seeks to address the long-time frustration of local governments powerless to tax or reap the benefits of gas and oil drilling in their communities.

House Bill 1373, introduced by Rep. William DeWeese (D- Greene County) would permit the taxing of oil, gas, and other valuable minerals, as real estate. The bill would amend assessment law and effectively overturn a controversial decision by the state Supreme Court in 2002 that ended the long-standing practice of taxing minerals as real estate.

Although real estate agents and an attorneys recognize gas, oil, and minerals as part of real estate, assessors in Pennsylvania are not allowed to consider those as part of real estate, the court said.

Prior to that ruling, ten southwestern Pennsylvania counties had taxed oil, gas and minerals. They include Armstrong, Centre, Clinton, Elk, Fayette, Forest, Greene, McKean, Warren and Westmoreland. In the 2001-2002 fiscal year, school districts in those counties collected $2.6 million in so called OGM taxes, “oil-gas-mineral.” That accounted for about half a percent of the total school taxes in those areas, but in some areas, such as Forest County, OMG taxes were 8.1 percent of their budgets.

House Bill 1373 doesn't seem to have much steam. Co-sponsors appear limited to representatives from those counties. The bill is one-page – hardly enough to address the constitutional, taxation, and equal treatment issues the court sought to correct in voiding the tax.

Other states have different ways for communities that bear the burden of drilling and mining to benefit from the the wealth. An upcoming Scranton Times-Tribune report will take a look at how gas wells are, and are not, taxed in Pennsylvania. ]

For the text of House Bill 1373, click here.

--- David Falchek

Gas drilling info spreads across state lines

When looking for informational meetings on the Marcellus Shale, think outside state lines. Knowing that the Marcellus Shale isn't contained in the Keystone State, groups looking to inform the public about natural gas drilling are publicizing or holding meetings in adjoining states. Damacus Citizens for Sustainability, which is based in Wayne County, has held at least two meetings in Callicoon, N.Y. The May 31st meeting at the Delaware Youth Center featured a slide show narrated via phone by Theo Colburn, Ph.D., the co-author of “Our Stolen Future.”

Friday, the Catskill Mountainkeeper and Sullivan County Planning Department are co-sponsoring an education forum on natural gas drilling in Liberty, N.Y. Click on the link below for details.

http://www.catskillmountainkeeper.org/node/516

OGAP Report on the Marcellus Shale

The Oil and Gas Accountability Project, a Colorado-based environmental organization dedicated to reducing the impacts of oil and gas development, has released a new report on Marcellus shale drilling.

The report provides helpful information on the size, depth, location and geology of the shale, as well as basics on horizontal and vertical drilling and the cost to develop different types of wells. But the report is most provocative-- and takes its most direct advocacy stance-- in its sections on hydraulic fracturing, naturally occurring radioactive materials (NORMs), metals, hydrogen sulfide and well spacing.

For example, the report sites Schlumberger, an oil and gas service company, and representatives from Range Resources and Cabot Oil and Gas saying that slickwater, a type of hydraulic fracturing fluid that requires "much more water than a typical sand and water frac," may be more effective at fracturing high-pressure areas of the shale than nitrogen gas or nitrogen foam.

"If this is the case," the report notes, "then landowners in the overpressured regions in the northern part of the play [which includes Northeastern Pennsylvania] can expect to see a lot more water truck activity than landowners in the southern part of the Marcellus shale."

The report devotes several sections to the amount of water that may be needed to explore the shale. It notes that "a well drilled in the Marcellus shale may have to be fracked several times over the course of its life to keep the gas flowing, and that each fracking operation may require more water than the previous one."

The report recommends that Pennsylvania study the radioactive material that may be in the waste produced from Marcellus wells (a process that has already been started, according to comments by Ronald Gilius, the head of the state Bureau of Oil and Gas Management, at an operators summit in Harrisburg earlier this month). The report points out that Pennsylvania does not have specific oil and gas regulations that pertain to NORMs, but other states, including Texas and New Mexico, do.

This may be a concern, OGAP notes, because the Marcellus shale is considered to be relatively more radioactive than other geological formations. The report cites a 1992 study of the radioactivity of the shale where it approaches the surface in Onondaga County, N.Y., which showed that the average amount of radon found in homes underlain by Marcellus shale was more than twice the U.S. Environmental Protection Agency's "action level"-- "the level when it is recommended that homeowners try to reduce the radon."

The OGAP report is based primarily on information drawn from other gas shales where more exploration has been done, like the Barnett Shale in Texas, but OGAP cautions readers "not to assume that what has occurred in any other gas shale basin will necessarily occur in the Marcellus shale." Most of the data is compiled from news reports, oil and gas trade publications, and scientific studies.

Deisel spill clean up

On June 4, diesel leaked from a tank at a Cabot Oil & Gas Corp. drilling site in Springville Township, Susquehanna County. The diesel leaked into a wetland near the Meshoppen Creek.

The diesel has since been cleaned-up from creek, but soil remains contaminated, according to state Department of Environmental Protection spokesman Mark Carmon. Now, a site characterization report that will include a description on the extent of the contamination is being developed.

Carmon said that the diesel did not reach the creek and that the amount of diesel that leaked is still being determined. Initially, contractors at the site believed that 800 gallons of diesel had leaked from the tank.

-- Josh Mrozinski

A "Major" Conservation Law Amendment

A bill recently introduced in the state House of Representatives would amend the Oil and Gas Conservation Law to clarify landowner and environmental protections during drilling in the Marcellus Shale.


Rep. Sandra Major (R-Bridgewater Township) sponsored the bill, which would change the law so it consistently applies to Marcellus Shale wells. The bill also excludes production costs from royalty payments and ensures that horizontal drilling does not take place under any properties not controlled by a natural gas lease.


Currently, the Oil and Gas Conservation Law only applies if a driller penetrates the Onondaga Horizon- a geological strata often below the Marcellus Shale- or reaches a depth of 3,800 feet, whichever is deeper.


When the Conservation Law is not in effect (as it rarely is with Marcellus wells), an operator is free to fracture the shale from a well on a leased property and pull gas from fractures that run under a neighboring, non-leased property (this is the "rule of capture"). The operator would not be compelled to pay that neighbor anything for the gas pulled from the well. When the Oil and Gas Conservation Law is in effect, though, the rule of capture no longer applies. Instead, the law regulates the spacing between wells and the size of a "pooled" area of land under which natural gas is produced, so that all affected landowners share the royalties.


The law also determines that royalty owners have a one-eighth interest (or a 12.5 percent royalty) in the gas produced at a well. Under Ms. Major's revisions, the dollar amount of that one-eighth interest has to equal "the current market value of all gas... as measured at the well head when produced," not the value of the gas minus the costs the operator incurs in pulling it from the shale (which is how some operators in the state have interpreted the statute). The revised bill is also careful to note that a landowner can negotiate a royalty that is greater than the mandated 12.5 percent.


The revised bill also requires operators to demonstrate on the permits they file with the Department of Environmental Protection that "any anticipated horizontal drilling shall not be conducted under or through any lands where an oil and gas lease does not exist between a landowner and an operator."


The full text of the bill is here.

Natural gas workshop June 23

Penn State Cooperative Extension and state Rep. Karen Boback are hosting a workshop on June 23 about natural gas leasing.
The workshop is titled, "Understanding and Negotiating Natural Gas Leases."
It begins 7 p.m. at the Lake-Lehman High School Auditorium.

The workshop has a $15 fee.
To register, contact the Luzerne County Extension Office at 570-825-1701 or call 1-888-825-1701 toll-free.


For more details or directions, contact one of Boback's offices:
- the Mountain Top office is located at 7844 Blue Ridge Trail, 570-868-7780
- the Sweet Valley office at 5315 Main Road, 570-477-3752
- the Tunkhannock office at 6 Cross Country Complex, 570-836-4777

-- Josh Mrozinski