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Q: What is driving
the interest in gas drilling in the area?
A: Three factors are driving the interest: 1. The presence
in the region of the Marcellus Shale formation and the natural
gas reserves many believe it contains; 2. New technologies
that make it possible to capture the gas; 3. The close proximity
the formation has to the nation's largest natural gas market,
which is the metropolitan corridor running from Boston to
Washington, D.C.
Q: Where is the drilling already
occuring in Lycoming County?
A: Three locations, with the biggest location in the northcentral
part of the county. Also there is a lot of activity in the
Salladasburg area. More recently, activity is beginning in
the Hughesville-Picture Rocks corridor.
Q: What are the potential economic
gains for landowners?
A: Landowners may lease their land for gas exploration and
receive royalties for any gas removed from their property
and sold commercially. Landowners, as of July 2008, are being
paid lease rates of $2000 to $3000 per acre for a five-year
lease. The state requires that landowners receive a minimum
of 12.5 percent in royalty payments for gas sold commercially,
though that is negotiable and may be higher.
Q: Does the landowner have to sign
the lease offered to him?
A: No. Landowners are sometimes told they are being offered
a âstandard industry lease.ã There is no such
thing. Landowners have the right to negotiate a lease that
is mutually beneficial to both the landowner and the company.
Often addendums are used to modify the terms of the lease
and create conditions more favorable to the landowner.
Q: Outside of the economic benefits,
what are some of the issues landowners can negotiate into
their leases?
A: There are up to 37 addendums addressing subjects such as
who is liable if someone is injured on the property during
drilling operation, site restoration, pipeline installation,
conditions of lease termination and methods of settling grievances.
It is important to remember a gas lease is a binding legal
document. An attorney versed in gas leases could be consulted
before signing a lease.
Q: How will a gas lease affect ag-land
preservation, conservation easements and other programs?
A: State law allows gas resource development without adversely
impacting state agriculture preservation programs as long
as no permanent buildings are constructed. The same holds
true with the federal program CREP as long as the land is
restored back to a farmable condition. A landowner must repay
CREP money on any land that is not restored. The tax program
Clean and Green allows land to contain a well head and access
road without affecting program status. Prior to signing a
lease, the landowner may negotiate for the company to pay
any rollback taxes owed the government.
Q: Is it possible to lease my land
without having my property disturbed by drilling?
A: Yes. You could negotiate a âno surface activity clauseã
into your lease which means a company can place your property
in a drilling unit and drill on property adjacent to it.
Q:
What is the level of disturbance my property will have during
and after a gas drilling operation?
A: There is significant property disturbance during the operation,
but, depending on the location, evidence of drilling varies
after resoration is completed. Typically for wells being drilled
in the Marcellus Shale, a 2 to 4.5-acre area is graded. State
law requires a site to be restored within 90 days of the end
of the operation. If the operation is in an open area such
as a pasture or field, there will be little evidence drilling
occurred. If it occurred in a wooded area, trees must be removed,
so there will be more of a long-term change.
Q: What is the common
length of a gas lease?
A: Typically, it is five years. Very often a clause in the
lease will automatically extend it another five years, but
that can be negotiated out of the lease. Attorneys typically
advise including a âright of first refusalã clause
in the lease, which allows the landowner to shop for better
rates once the initial lease period expires. The clause would
allow the gas company to match any offer the landowner receives.
A lease automatically is extended if gas drilling occurs on
the property before the initial lease period ends. Once commercial
gas production begins, the lease continues until production
ends. Source: Thomas Murphy, Penn State Cooperative Extension
at Lycoming County
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