Natural Gas Deposits Lead To Land Rush

Despite the amount of properties sitting on the market unsold and unused, there are some properties that are in extraordinary demand. “Unsuspecting property owners around the country are …

Despite the amount of properties sitting on the market unsold and unused, there are some properties that are in extraordinary demand.

“Unsuspecting property owners around the country are getting trampled in an old-fashioned land rush by natural gas companies and speculators trying to lock up long-ignored drilling rights quickly and cheaply,” according to the Associated Press.

Property owners in rural and suburban areas known or thought to be on top of untapped natural gas deposits from Pennsylvania, West Virginia and New York to Indiana and Texas have been receiving visits from speculators and natural gas companies interested in the deposits. These natural gas deposits have been “made suddenly viable—and valuable—by soaring prices and improved drilling techniques,” according to the AP.

A record 7,297 gas and oil drilling permits were processed in 2006, up 21 percent from 2005, according to the Pennsylvania Department of Environmental Protection. The number of wells drilled grew from 1,354 in 2000 to 4,183 in 2006.

“Recent research opened the door to the possibility that an area stretching from southern New York through western Pennsylvania and into Ohio and West Virginia contains vast amounts of natural gas in a layer of rock known as the Marcellus shale,” according to the Centre Daily Times (State College, Pa.). The Marcellus shale is thought to contain 50 trillion cubic feet of recoverable natural gas.

The U.S. is the largest natural gas consumer in North America, according to the U.S. Energy Information Administration, and accounted for more than 80 percent of the 27.6 trillion cubic feet of natural gas consumed in North America in 2004.

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Thanks to new technology, natural gas companies do not have to rely on natural gas that seeps up into permeable layers of sandstone. Now, by using water or another substance, natural gas companies can fracture the shale itself and release the natural gas from the ground.

That new technology has combined with rising energy costs and rising demand for cleaner-burning energy to make the Marcellus shale—along with other natural deposits, such as the Barnett shale near Arlington, Texas or the New Albany shale in the Illinois Basin in southwest Indiana—accessible and desirable.

“Gas companies such as Chesapeake Energy Corp. make no bones about their desire to lock up leasing rights. The Oklahoma City-based natural gas giant calls its aggressive lease acquisition program the ‘land grab’ in its latest annual report to the Securities and Exchange Commission,” according to the AP.

Many people have reported being lied to and low-balled by natural gas companies and speculators; some have signed leases earning them a few dollars per acre plus royalties only to hear of their neighbors being offered hundreds of dollars per acre and higher royalties by a rival natural gas company or speculator.

They may wish they had taken a page out of the book of retired dairy farmer Dewey Decker. People showed up in New York’s Broome and Delaware counties and began offering landowners $50 per acre, he said, according to the AP, “but Decker held out and formed a pool with other landowners that has grown to more than 40,000 acres. The approach worked: Decker’s group agreed to a five-year deal that pays $2,411 an acre and a 15 percent royalty.”

Other property owners, such as Dan Hall of Snow Shoe Township, Pa., have found that the mineral rights to the land they own were sold before they even bought the land. “Two years ago, there were two wells on [Hall’s] property. Now there are five, two of which are less than 1,000 feet apart. The past several years have been an ongoing battle with the gas companies that came onto his land to drill and left him with a patchwork of roads criss-crossing his woods and wells taking up about five acres of his land,” according to the Centre Daily Times.

There is little that owners can do in such situations. Hall said he has been working toward a settlement with the gas companies, but with no success to date. Hall said he recommended that land owners who still have the mineral rights to the land they own should keep it that way, rather than selling the mineral rights to speculators or gas companies.

“Specialists with Cooperative Extension have been holding meetings across the state in an effort to let landowners know what factors they should consider before signing away their gas rights. Tom Murphy, Lycoming County Cooperative Extension educator, said about 13,000 people have participated in the seminars so far. He said interest has been growing as companies are looking at drilling into the Marcellus shale,” according to the Centre Daily Times.

“Murphy said one of the most common questions landowners have is what should be added to a lease to make it more favorable to the property owner. Options include shortening a lease from 10 years to 5 years or taking out a clause that automatically extends a lease. A lawyer can help a landowner with those negotiations.”

Those who own property in an area known or suspected to have a natural gas deposit should determine whether they still own the mineral rights for that property. They should also discuss with a lawyer what steps they would like to take once they find out the answer.


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