Sunday, August 21, 2011

News junkies maybe not

Just a note on some new interest focused on potential Marcellus Shale development within some local cemeteries.  The odd thing about that article comes from multiple quotes in there from folks saying this was all news to them??  There was a whole news cycle on the leasing of gas rights of local cemeteries....  over a year ago?!  I think it was Bob Mayo who first noticed that the preponderance of local cemeteries have recent oil or gas leasing deeds on file.  He had a piece focused on this very topic on WTAE.  I can't find a link to that original piece, but it was followed up by stories focused precisely on the topic of local gas leasing in cemetaries including stories in the Trib, a feed from the AP that ran in papers cross the state and beyond, even the region's top blogs all were interested at some point over the last year.  So much news coverage was there that the Pittsburgh Catholic newspaper had its own editorial reply to the story as well.  That is a pretty wide breadth of venues for a local story here.  Still didn't quite register I guess.

Anyway... the interactive map of oil and gas leasing in Allegheny County is still up if you want to poke at it yourself.   Everyone can find the leased parcel closest to them if you tried.

More general on Marcellus issues.  The Atlantic has the in-depth piece of the week: Can the Fracking Industry Self-Regulate?   Also,  Marketwatch has some key points on Consol Energy's decision to sell away a lot of its Marcellus Equity. Inky has: Is Gas-Drilling industry sucking PA's creeks dry?   And from Centre County here in PA a cautionary tale of negotating with the land man. What did they get for leasing their land in this big Marcellus boom? $125 and acre.  Total net over the last 4.5 years probably does not pay a single years cost for a single teacher.  Who is to say that in the future looking back the leases being signed today don't look equally ill-informed on the part of consumers?  We need a statewide crowdsourcing project to find the landowner who signed the lowest valued Marcellus Shale lease.  Folks quote that $3/acre number. Is that for real, and is that the lowest?  Yes, I know there is a state minimum on royalities landowners have to get.  Some might thing that an overbearing bit of regulation, but I wonder what royalites people would be accepting if not for state law that prevents anything too low from being valid.

More marcellus....  The Cleveland Plain Dealer has the most economically fascinating little story about Ohio, which even though everyone thinks it is about to be hit by the gas development wave, is actually at an all time low for gas drilling within the state.   To be precise, the lowest level of activity since 1887.  The cause it says is low natural gas prices causing drop in drilling by half in just the last couple years.  So what is the cause of that natural gas price drop??   No time to get into the general equilibrium discussion at the heart of that, but think 2nd order effects to begin with.  It's really an important little story in lots of ways.   Some of the impact studies like to throw in the benefit consumers see from lower natgas prices if they can be attributed to Marcellus development.  Fair enough if you do it right, but is not another indirect impact the lower employment/impact of non-Marcellus drilling also to be factored in if you are doing that comprehensive a report? 


Anonymous The Wiz said...

Interesting. All that land under lease in Allegheny Co and there hasn't been even an application for a single well.

I know a retired couple that signed a 10 yr lease just two year ago in 2009 for only $5/acre/yr for 161 acres. Shameful. As for minimum royalty, I know of a lease in WV from 1914 that is still in affect that pays only $50/yr no matter how much gas/oil is taken. But WV now has a law stating that any new wells must pay 12.5% so any Marcellus or Utica wells will have to pay that minimum....still low as most new leases are 15% up to 20% or more. But it shows how little people got before the minimum was established (of course $50 was a good bit of money in 1914).

This is just the tip of the iceberg in leasing issues. There are so many loopholes and tricks to avoid that there are blogs and websites dedicated just to gas leasing.

The drop in well drilling in Ohio is due to low prices and those shallow and/or vertical wells are no longer economically worthwhile. However, while I haven't seen the data, I have been told that shallow and/or vertical wells are being drilled at a high rate in Pa so that companies can tie up land past the primary lease term. I'm guessing that many companies that drilled these wells in Ohio have moved rigs into Pa to meet this demand.

Additionally, some drillers use these old style rigs to drill the vertical portion down to four or five thousand feet and then bring in the advanced rigs to do the turn and horizontal legs. This saves money and allows them to drill more horizontals with fewer advanced rigs. And keeps the older rigs busy even though it may not show up in well numbers.

Sunday, August 21, 2011 11:05:00 PM  
Anonymous MN said...

Even more Marcellus...

Tuesday, August 23, 2011 10:37:00 AM  

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