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Home / Articles / News / Local NEWS /  Is another oil and gas land-rush starting in Athens?
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Wednesday, May 16,2012

Is another oil and gas land-rush starting in Athens?

Another firm offers low up-front bonuses for local oil & gas rights

By Jim Phillips
new_lease_signing_03_cc
Photo Credits: Photo by Cayce Clifford.
Photo Caption: Athens County landowners met at America’s Choice Realty Tuesday for an informational oil and gas lease-signing event at The Market on State.

Based on recently released geological data from state experts, the price Athens County landowners believe they can get for oil-and-gas drilling leases has plunged dramatically in the last couple of months.

In the wake of this development, one of two major players in the local leasing market rolled out on Tuesday what one of its representatives called "the best current offer in town."

And whereas just a few months ago, many county landowners were expecting to collect signing bonuses of $2,500 per acre, the so-called best deal in town now includes up-front payments only one-tenth that big.

Based on newly available geological data, Pennsylvania attorney Jake Polochak told a group of local landowners, industry representatives have been reporting that "it is too speculative (for landowners) to expect to get thousands of dollars per acre paid (in Athens County) right now."

Polochak's law firm has been working with America's Choice Realty to organize landowner groups in Pennsylvania and Ohio. Their aim is to put together blocks of acreage to increase landowner leverage in bargaining for the best leasing terms with oil-and-gas companies that want to drill into the Utica shale in eastern Ohio.

The America's Choice leasing offer was pitched to a group of about 100 county landowners at a public meeting Tuesday evening at The Market on State on Athens' east side. The group has already put together sizable chunks of acreage among property owners in the county, and before its public meeting, it held an information session open only to already signed-up members.

For those who sign up, or stay signed up, with America's Choice, the leasing deal guarantees a $250-per-acre signing bonus up-front for deep-drilling rights. Much higher lease payments – up to $4,100 per acre – could possibly come later, as well as 16.5 percent royalties on oil-and-gas sales. But this would only happen if Athens County turns out to be a lucrative spot to drill in the Utica shale formation, located about a mile and a half beneath the ground.

The America's Choice offer is roughly comparable to a deal now being shopped in Athens County by the West Virginia-based company Cunningham Energy, LLC. That deal would pay landowners a signing bonus of $125 per acre, with the possibility of much higher payments later if drilling is productive, as well as royalties on oil-and-gas production.

Cunningham's proposed lease deal could pay up to $5,700 per acre, but the higher payment, as with America's Choice, is not guaranteed, and could be delayed for up to 10 years. Cunningham's current offer represents a significant climb-down from an earlier offer that included a signing bonus of $2,500 per acre.

The leasing party in the America's Choice offer would be Wishgard, LLC, a Pennsylvania real-estate firm that does not do any drilling or exploration itself, but would try to sell the leases to someone who can, or find a venture partner.

The group's main competition in Athens County so far has come from local attorney John Lavelle, who has signed up hundreds of landowners on lease options with the West Virginia-based Cunningham Energy. In recent weeks, with the release of data from the Ohio Department of Natural Resources suggesting that Athens County may be a less lucrative spot to drill for oil and gas than counties to the north, Cunningham has backed off from the earlier lease offer that included the $2,500-per-acre signing bonus.

Polochak, whose group claims to have locked up lease options on more than 25,000 acres in the county, said Tuesday that the oil-and-gas industry and investors appear hesitant to fund big-dollar leases in Athens County. He said this reluctance is based partly on data released in March by ODNR geologists, indicating that Athens County is outside the richest part of the Utica shale play.

The state officials, however, have stressed that their maps are based on limited data points in Athens and nearby counties, and may change again if future test wells turns up better results. They also point out that oil and gas companies, especially the big players, likely have far better information about Athens County's underlying carbon resources than the state has.

The lease option Polochak's group is offering would lock in the $250-per-acre signing price for all lessors who actually own their mineral rights, then require Wishgard to pay an additional $1,850 per acre per acre for five years or walk away from the lease within 90 days. After that, the company would have an option to renew for a second five years, at a price of $2,250 per acre. Landowner royalties on gross production would be 16.5 percent.

America's Choice Realty has said all along that it's shopping the local acreage in blocks to any potential buyer, trying to find the best possible deal. After the release of the state geology data, however, Polochak said, industry representatives' ardor to buy drilling rights in Athens County noticeably cooled.

At one point, the attorney acknowledged, America's Choice had been hoping for signing bonuses around 20 times what the company has settled for. "When we got this offer, it felt like a slap in the face," he said. "(We felt like), $1,850? We want $5,000!"

However, he said, given the current state of information about how exploitable the Utica is beneath Athens County, he believes locking in $250 an acre, with the possibility of higher payments later, is a good hedge.

"If… test wells show what (the Ohio Department of Natural Resources) suspects (about Athens County), you will have been overpaid," he suggested.

Chris Herr, a broker with America's Choice, echoed what Polochak said about the state of the market for Athens County drilling sites right now. A response he's often heard from industry reps about the county, he said, is, "It's not in our 'buy zone'… Do you have anything in Guernsey (County)? Do you have anything in Monroe (County)?" (The east Ohio deep-shale boom recently has moved into those counties, along with Muskingum and Noble.)

America's Choice will be holding another event Saturday, followed by a lease-signing event at a later date. 

Cunningham will hold a public event today to talk about its latest lease offer (see related article in this issue).

 

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REPLY TO THIS COMMENT

Granddaddy left this land to the family after he died of lung disease from "naturally occurring" substances in the ground he was mining so it's my right to sell out and finally make some money in this poor corner of the State. Who cares about my children or my neighbors children or the hippy tree huggers or college kids and teachers. The world is a tough place for those without wealth. I want mine now and don't care about how future people will live from the land we leave behind. 


<sigh>      


Greed will destroy this place. I'm happy to have lived here while the community seemed a little more connected to the earth and not the resource extraction industry at the cost of a healthy water table, breathable air, and ecosystem not threatened by toxins. 


Can't say I'll be happy about leaving but when the State legislators think it's a good idea to pass laws so the industry can protect their "trade secret" poisons from being revealed to the public and that doctors must keep their mouths shut about what substances they discover are damaging their patients health because it might cause political harm to job creators drilling out our resources which they sell to China then I'll gladly take myself and my tax dollars elsewhere.

 

 

 
 
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