Oil & gas frenzy could shake up leasing market here

Opinions differ on when, whether, and to what extent a statewide and regional boom in oil-and-gas drilling will hit Athens County.

On the assumption that it will eventually get here, however, a statewide farmers advocacy group will be in Athens Tuesday, to share tips with local property owners on what to do if they’re approached about leasing their land for drilling.

“The wave is coming,” assured Dale Arnold, director for energy services for the Ohio Farm Bureau Federation.

He said this could mean some landowners in Athens County will be offered tempting prices to lease their land for oil-and-gas drilling. Those who are, Arnold said, should not jump at a big offer before asking some important questions.

Arnold reported that in eastern Ohio counties where the boom is already going strong, such as Columbiana, Harrison, Tuscarawas and Jefferson, “I have seen, with effectively negotiated leases, payments of between $500 and $2,200 an acre during the first term of the lease… As recently as five to 10 years ago, with the old vertical-shaft drilling techniques, $30 an acre would have been considered a good deal.”

Before signing a lease, Arnold warned, landowners should realize that the new drilling technology likely to be used has dramatically changed the rules for oil-and-gas leasing.

“You need to have a lot of questions answered before you go into the process,” he said.

Arnold said one thing he’ll warn about when he speaks in Athens Tuesday is that landowners should make sure they aren’t being asked to sign a simple “1990s-style” lease, of the type commonly used with vertical drilling 20 years ago. He said such a lease is probably inadequate to cover the ramifications of a new well using horizontal drilling and hydraulic fracturing techniques.

Though there hasn’t yet been a huge surge of interest in oil-and-gas leasing in Athens County to compare with the feverish activity in counties along Ohio’s northeastern edge, Athens County Recorder Jessica Markins said Friday that she has seen signs of increased attention.

“We have had some (increase in) phone calls from property owners wanting to find out if they own the mineral rights to their property,” Markins reported. “In the last couple of months it wasn’t an everyday thing, but it was more than normal, so it made us think that they were being approached in some way (about leasing their land).”

The greatly increased interest in oil-and-gas drilling in Ohio has spread from Pennsylvania and New York. It results largely from new, higher-impact drilling techniques that involve drilling horizontally under the earth’s surface, rather than straight down as in the traditional method, and are combined with “hydraulic fracturing.”

Known popularly as “fracking,” this method uses pressurized liquid to break up underground rock formations and force out the natural gas. The new techniques – which bring with them a whole new raft of environmental concerns – have made it possible, and financially attractive, to drill in the Marcellus and Utica shale formations, both thought to be rich in natural gas.

The Marcellus extends across New York Pennsylvania, Maryland, West Virginia and eastern Ohio, as well as parts of Kentucky and Tennessee. It doesn’t come quite as far west as Athens County, though another oil-and-gas-bearing formation, the Utica, extends further west and does underlie Athens County.

The potential for big profits and greater U.S. energy independence is sparking enormous enthusiasm in some circles. A new publication out of Pennsylvania, the Marcellus Shale Coalition Quarterly, has just put out its first issue; its lead article, “Mighty Marcellus,” profiles the potential of the shale formation, and predicts that more than 3,500 new wells could be drilled on it by 2020.

In a review of the attitudes of state governments toward shale drilling, the magazine notes that Ohio Gov. John Kasich sees it as a big chance to boost the state’s economy.

“If we can get that Marcellus shale and if it can yield a significant amount of gas – oh, it will be a godsend for our state,” Kasich has said. “But you got to drill before you know.” (The state may also open up more public land to drilling.)

Naturally, some people have concerns about the environmental impact of horizontal fracking; these have been magnified by the documentary film “Gasland,” which portrays the impacts of fracking on local environments, particularly drinking water.

Proponents of the technique note that fracking has been used in Ohio for some 60 years, and that state regulators here have never documented a case in which the technique contaminated a drinking water source.

“Nobody’s yet come up with one,” says Thomas E. Stewart, executive vice president of the Ohio Oil and Gas Association.

Critics of the technique, however, suggest that’s misleading.

Mary Beth Lohse, conservation chair of the Ohio Sierra Club, said it may be true that the fracking liquid – typically water mixed with petrochemicals – which is injected deep into the earth to break up shale, has never contaminated groundwater once it’s been injected into the shale.

Aquifers are typically less than 1,000 feet underground, while hydraulic fracturing takes place far below that, between 5,000 and 9,000 feet deep, and released stress from the impact of fracking radiates outward horizontally, not upward.

However, Lohse said, this doesn’t mean that trucking in huge volumes of chemically laced water – millions of gallons per well site – then bringing it back out to be either re-used or stored in an underground injection well, doesn’t entail big environmental risks.

What people like Stewart conveniently neglect to mention, Lohse said, is “lots of stuff happening closer to the surface,” such as potential spills while the fracking liquid is being prepared, or after it’s brought back out of the ground.

In many cases, she said, the used liquid is stored on-site in holding ponds. “Of course… if the pond’s not built right, or it’s not lined right, you can have leakage problems,” she said.

She noted also that Ohio is home to many abandoned wells and underground coal mines. “These are all pathways for contaminants,” she said, if the highly pressurized fracking liquid flows into them as it’s being pumped underground.

Lohse added that because of the enormous pressure of the liquid, it can dissolve toxic substances such as metals from the rock it fractures, “including radioactive materials,” which are then in the mixture when it comes back out of the ground.

“The biggest problem is, you’re talking about massive quantities of water,” she said. “There’s a question of where you’re going to get that water.”

In January, the Ohio Department of Natural Resources issued a review of fracking activity and regulation in the state. It noted that state environmental agencies “have recently been discussing anticipated program changes that may be necessary due to anticipated development of the Marcellus and Utica shales.”

The review states that the Ohio Division of Mineral Resource Management expects to process about 450 new drilling permits in 2011, and to plug about that many old wells. It judges that the 170 permitted Class II disposal wells in Ohio provide capacity “sufficient for the currently anticipated volumes of waste” from new fracking operations.

The report addresses some of the concerns raised by Lohse, though how thoroughly is open to question.

Regarding “potential conduits for fluid migration,” for example – i.e., old mines and wells – the report notes that in reviewing a well permit application, state regulators “review permit files or historic well records” to see if any old wells are nearby; in areas with underground mines, it says, state law “provides authority for an intermediate casing to protect miners and to isolate the mine.”

As for controls of the fracking liquid at the surface, the report notes that state rules govern placement and construction of holding ponds, and that state law allows the DMRM chief “to initiate actions” if the agency has “reasonably determined (such ponds) are causing imminent health or safety risks and the owner cannot be contacted to initiate such actions.”

Lohse said the Sierra Club is concerned that the 2005 Energy Policy Act gave the fracking industry an exemption from the Safe Drinking Water Act.

“Basically there is no federal regulation of the process,” she said. “There should be no exemption for fracking… If this is so safe, if this is so wonderful, why do they need an exemption?”

In addition, she said, the group dislikes the industry’s insistence that the chemical composition of each company’s fracking liquid is a trade secret.

“We don’t agree with that,” she said. “We think there should be mandatory disclosure of the chemicals.”

Noting that the U.S. EPA is in the midst of a study on fracking, Lohse suggested that Ohio should ban new horizontally fracked wells until it beefs up its regulatory structure.

“We just don’t think Ohio is ready to regulate (this process),” she said. Until such time as it is, she said, “we should just take a deep breath; let’s have a moratorium on issuing new permits for this type of activity.” At the very least, she said, Ohio should wait to see the conclusions reached by the federal EPA before proceeding.

Arnold of the Farm Bureau Federation said he believes the effectiveness of the new techniques for extracting natural gas mean that eventually any spot in “all four corners of the state” that has supported drilling in the past will be looked at for potential new drilling.

Energy and leasing companies “are looking at every geological structure that has been used to harvest oil and gas since the beginning of the last century,” he said.

When he speaks Tuesday, Arnold said, what he’ll tell landowners is this: If it sounds like you’re being asked to lease your land for horizontal hydraulic fracturing, and you’re being shown a short, simple lease of about five pages, don’t sign it until you’ve gotten more information.

Such a lease may provide a big up-front payment, but one that “substantially decreases” as the lease ages, he warned.

It may also not provide for an adequate “pooling” area around the mine – basically the amount of acreage in which other mines can’t be drilled, to avoid depleting the gas resource.

While standards exist for how big this area should be, he said, they’re based on vertical drilling, and on how deep a well is; the new techniques can create higher impact with shallower wells, he said, and therefore need a larger pooling area.

For all these reasons and more, Arnold suggested, landowners should be cautious about signing away drilling rights.

If it sounds like the deal involves horizontal fracking, but the lease looks short and simple, he advised, “you have to respectfully decline, and direct the company to give you a more detailed lease.”

The OFBF presentation will take place at the Alexander Local Schools cafetorium in Albany at 7 p.m.

On April 20, Josh Fox, director of “Gasland,” will appear at Ohio University for a screening of his movie and to answer questions. That event, sponsored by OU’s online College Green magazine, will take place at 8 p.m. in Memorial Auditorium.