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Wednesday, March 2, 2011

Drilling Rights Leasing--Is It The Best For You?

For some landowners, much hand-wringing over leasing   SATURDAY, FEBRUARY 26, 2011 12:03 PM  WRITTEN BY SEAN D. HAMILl Post Gazette 

This time of year, when the trees are barren, Kim and Mark O'Donnell can look in all four directions from atop the knoll behind their 152-year-old Washington County farmhouse in West Bethlehem Township.
What they can see is part of the education process they've been through over the last three years: one Marcellus Shale well in each direction that either already has been drilled, or is about to be, by Atlas Energy -- all within a mile of their home. 
They also can see where their property borders that of their neighbors -- all of whom have already decided to lease their natural gas mineral rights, most of them to Atlas.
Only in the last two weeks, after three years of considering the financial, environmental and emotional issues, did the O'Donnells decide they would not sign a lease with Atlas, which Chevron Corp. bought late last year.
"I guess we're the holdouts," said Ms. O'Donnell, who manages their 77-acre farm that includes 20 Jacob sheep and two Dexter cattle. "We still have to call Atlas and tell them."
Before they got to that point, they explored the websites of Atlas, Range Resources and Chesapeake Energy; read environmental advocate Sierra Club's Pennsylvania chapter reports; looked for Marcellus Shale news stories on ProPublica's website and read local newspapers; found information on other areas of the country with shale drilling, like Wyoming and Texas; attended meetings held by Penn State UniversityTrout Unlimited and others; and talked with their township supervisor and state representative.
After all that, and watching Atlas' financial offer rise from $350 an acre and a 12.5 percent royalty to $1,500 and 15 percent, what finally persuaded them not to sign?
"Two words come to mind: stewardship and sustainability," said Mr. O'Donnell, a project consultant. "We moved here [from suburban Washington, D.C.] to be stewards of the land. And extraction by definition is not sustainable."
The issues the O'Donnells worked their way through are not unusual, even if their decision seems to be, based on the leases nearly all of their neighbors have signed.
Tens of thousands of Pennsylvania families have had to face the same questions after getting the proverbial knock on the door from a landman -- or a phone call, e-mail or letter.
In the end, though, for most, it becomes a balancing act of interests: Is the money you are offered worth the risk you believe you face from drilling on or near your property?
The answers are as varied as the people weighing those factors:
Roji Hoskin, owner of a 124-acre horse farm in Washington County, signed a lease in 2008 that made her property home to a six-well drill site after she talked to neighbors and decided the money she was offered would make up for several years of bad business and get her out of debt.
Nina Segelson of Plum was so confounded by what the landman was telling her that she organized an informational meeting for her neighbors with a landowner-leasing consultant, but she is still unsure if she will sign a lease for her family's eight-acre property because of the potential risk to her well water.
Jim Yahner, owner of a 500-acre grain farm in Chess Springs in Cambria County, has been attending landowner meetings to learn about leases for more than a year and wants to lease his land, but his wife won't agree to sign, after having read reports of environmental problems at other drill sites around the state.
"I come to these meetings and tell her what I've learned, but she looks at all the negatives, about problems with the water," Mr. Yahner said after a recent landowner meeting in Loretto.  The information he has gathered from studies and experts he has heard through the Loretto Landowners Group has satisfied Mr. Yahner's concerns about drilling's impact on his well water. And he knows he could use the money. "I wouldn't have to struggle so much" if he had a lease, he said. Though the end decisions may vary -- even within the same house, as the Yahners can attest -- the best approach to reaching those choices is simple, said Tom Murphy, an extension educator and co-director of the Marcellus Center for Outreach and Research at Penn State University. "Get informed," said Mr. Murphy, whose university, through its Cooperative Extension offices, is credited with educating more landowners about mineral rights leases in the Marcellus Shale era than any other single source in the state. Penn State educators and others have tried to drive home the point that landowners can include clauses in leases that provide controls over what is done and where something is done on their land. Those who were approached early in the land rush -- prior to 2009 -- had a harder time finding resources. "It's certainly easier to get your hands on information now," said Jackie Root, a landowner in Lawrenceville in Central Pennsylvania. She got her first knock on the door from a landman in 2000 for a completely different shale formation, the Trenton Black River. Her search for information was so challenging that she formed her own landowner group and then a landowner consultant agency, R&R Energy ConsultingMore than a hundred landowner groups can be found now across the state, as well as a newly created industry oflease consultants and landowner organizers like Ms. Root, dozens of pro-drillinganti-drilling and environmental websites, and even a few groups that purport to strike a middle ground. But there is no standard process by which families educate themselves. Some have relied largely on the advice of neighbors or family. Others made sure their first call was to an attorney. Still others -- despite experts' advice to the contrary -- have taken the energy companies or landmen at their word. In fact, some were so pleased with the information they heard that they signed leases almost immediately after an offer and have become happy industry spokespeople, like Ms. Hoskin, who is featured in advertisements for Range Resources. "I can't say we're getting rich. But we're doing better than we expected," said Ms. Hoskin, who owns the land with her parents. "I sleep well at night now. I don't have to sit up and worry about finances." After she quizzed Range Resources about the impact on her land, and where they would drill and place their pipes -- she wanted to make sure the well didn't run right through the middle of her property and prevent her from constructing new buildings -- she called a neighbor from whom she buys hay. "He said they had put wells on his property and he hadn't had any problems," said Ms. Hoskin. Still, she wishes she had found out what some of her neighbors were getting in their deals. "In hindsight, we didn't get very much for our lease -- $9 to $13 an acre and a 14 percent royalty," she said, "when, if we had waited and asked around, we could have gotten much more."  Ms. Segelson, executive director of the Plum Senior Community Center, said she and her husband, Robert, a retired steelworker, were first approached two years ago by a landman. "They try to create a sense of urgency and say, 'You should do this now because we're making offers,' " she recalled of the pitch. "But I was confused and wanted to learn more." There were many issues that bothered her: what impact it would have on her well water; whether the company would drill under them with or without their consent "because who knows what goes on way down there;" and what it would do to their neighborhood. "Remember, you're not talking to a scientist," she said. "We don't deal with these questions every day." After talking with her neighbors and her son, Terry, an environmental management consultant, she decided to invite a lease consultant, Tyler Courtney, to talk to her and her neighbors. "It was helpful, and we want to go ahead with this [and lease] if there's a good opportunity for us," she said. "But you still have questions, you know? I read about the problems people had with their water, and no one wants that. Roji Hoskin raises horses on a 124-acre farm on Old Hickory Ridge Road in Washington. Ms. Hoskin signed a lease with Range Resources two years ago, allowing it to drill for gas on her farm.
Sean D. Hamill: shamill@post-gazette.com or 412-263-2579.

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