Drilling Lease Control Crucial
Rea wants a ‘bidding war’ among drillers
Wheeling WV Intelligencer
11 December 2010
By Casey Junkins
MORRISTOWN - When a landsman representing Chesapeake Energy approached
Bob Rea about leasing his natural gas rights to the company for $500
per acre, he decided to take a closer look at the deal.
In addition to seeing that offer increase to $2,000 per acre, the
Columbiana County, Ohio, resident crafted a lease that he believes will
provide protection for his water, timber and crops. The lease has yet
to be signed, though, as Rea hopes to create a "bidding war" between
Chesapeake and other drilling firms.
"It puzzles me why this industry is allowed to operate the way it does
- by swindling people out of money," Rea said when speaking to about 40
concerned property owners and other concerned parties during a forum at
Union Local High School in Morristown Friday.
The forum was organized by Belmont County land owner Bruce Seabright
and local attorney Ed Sustersic.
Rea's comments reflect his belief the land contractors working to lock
up acreage for natural gas drilling should be regulated and licensed,
much the way real estate agents are.
Dissatisfied with his initial Chesapeake contract offer, Rea eventually
convinced 700 landowners - controlling about 25,000 acres in Belmont,
Harrison, Carroll, Columbiana and Mahoning counties across eastern Ohio
- to form the Associated Landowners of the Ohio Valley. In now
presenting a united front, Rea said there are about 38 different
companies interested in the acreage now, including Chesapeake.
There are two horizontal natural gas wells in various stages of the
drilling process in Belmont County. One is located on Kirkwood Heights
and is operated by David Hill Inc., while the other is near
Barnesville, operated by Consol Energy Inc. The Consol well allowed the
driller to tap the Utica Shale rock formation at 8,450 feet below the
surface, proving that there is more shale available in the Upper Ohio
Valley than the more famous Marcellus variety.
Rea said those in Belmont County still looking to sign leases would do
well to join forces to harness their collective energy in dealing with
the gas companies.
"It takes a body of voices to get this thing accomplished," he said.
"If you are going to be a serious negotiator, you need to be serious."
In being serious, Rea and his associates have designed a lease they are
looking for the gas companies to sign.
Instead of signing a typical drilling lease, Rea strongly believes
landowners must be proactive to protect their rights by creating their
own leases.
In the lease, Rea does not specify the dollar amounts the group wants
per lease acre, or point out a particular percentage of production
royalties. Instead, he wants the drillers to engage in "a bidding war."
However, the financial aspects are only one point of focus for this
lease. With many recent concerns regarding the potential for water
contamination, explosions and other issues natural gas drilling can
cause, Rea's lease looks to prevent these problems before they start.
Under Article for "Impacts and Effects," there are several key
provisions, including:
§ a provision for disposal, which forbids
the driller from the "permanent disposal of any drill cuttings, or the
storage of residual wastes;
§ a clause prohibiting the companies from
storing gas, oil or brine, which is the wastewater drillers use in the
hydraulic fracturing, or "fracking," process;
§ a provision forbidding the company from
draining water from any streams, ponds or other bodies of water on the
landowners property;
§ a clause requiring 45 days notice before
timber is removed;
§ a provision for the protection of crops;
§ a requirement that all well sites, tanks
and other drilling areas be fenced;
§ a clause preventing the driller from
releasing a list of "hazardous materials" on the property;
§ a water testing plan to ensure drinking
water sources are protected from contamination;
§ an indemnity clause that protects the
landowner from any damage the driller may cause.
Rea said communications with at least one interested gas company have
been positive.
"They said, "There is nothing in this lease that is unreasonable,'" he
noted in expressing his optimism.
Another speaker addressed some of the widespread concerns about
fracking. He emphasized that "thousands and thousands" of wells have
been fracked across Ohio, noting the only time there should be any
problem with the process is if a well is not properly aligned.