Gas Drilling Is Up for Vote
Wheeling Intelligencer
13
November 2010
By Casey Junkins, Staff Writer
MOUNDSVILLE - Another local government is close to signing a natural
gas drilling deal, as Moundsville's coffers could soon swell by
$206,500 in lease revenue from AB Resources.
Residents won't be seeing any drilling rigs in the city, however, as
the contract between the city and AB stipulates that the Ohio-based
company must initiate its wells from outside the city limits.
"There will be no rigs on city property - they will drill horizontally
under our property," City Manager Allen Hendershot said. "That was
really important to City Council."
If council passes the resolution during its 7 p.m. Tuesday meeting in
council chambers at the municipal building, 800 Sixth St., Moundsville
will join several other local municipalities and public bodies in
gaining a gas revenue windfall.
The city of Wheeling (in coordination with the Wheeling Park
Commission), the Ohio County Commission, the Marshall County Board of
Education and the Marshall County Parks and Recreation Board have
already finalized Marcellus Shale drilling contracts.
Drilling Plans
Hendershot said the 59 acres to be leased to AB Resources - at $3,500
per acre - are located in the Valley Fork Property on 12th Street. This
city-owned land features facilities for baseball, softball and soccer,
as well as walking trail.
"There will be no interruption of the field usage," Hendershot said of
the park.
Unlike many other local elected officials who signed drilling deals
with Oklahoma City-based Chesapeake Energy, Hendershot said Moundsville
leaders liked AB Resources' deal better.
"We were also negotiating with Chesapeake. They wanted the ability to
run pipes across our property," Hendershot said. "AB Resources agreed
not to run any pipe on our land."
Revenue
Hendershot said city officials would like to repair the municipal
garage and purchase new equipment with the anticipated natural gas
money.
Initially, Chesapeake offered Moundsville officials lease payments of
$2,800 per acre, with 18.75 percent production royalties on any gas or
oil the company pumps from the ground. However, since Chesapeake's
first proposal, the local leasing price seemed to increase. Recently,
NPAR LLC, an affiliate of AB Resources, offered $4,000 in lease
payments for land in the Stone Church Road area.
In addition to the lease revenue, Hendershot said Moundsville's AB
Resources deal would grant the city 18.75 percent of production
royalties.
"Prices go up and down," Hendershot noted. "This appears to be a good
deal to council."
Several local property owners have signed drilling deals with AB
Resources, including the New Vrindaban Hare Krishna Community in
Marshall County. Members there are gaining $2,500 per acre in lease
revenue for about 4,000 acres - and 18.75 percent for gas produced.
Comparison to Other Local Governments
Earlier this year, the Marshall County Board of Education signed 177
acres over to Chesapeake for $2,800 per acre and 18.75 percent
production royalties. The Marshall County Parks and Recreation Board
also reached an agreement with Chesapeake for drilling in Grand Vue
Park. The park board got $2,900 per acre through its lease, also with
gas royalties of 18.75 percent.
Chesapeake contracted the Ohio County Commission for drilling at The
Highlands and other county lands. Leaders there are going to gain 18
percent production royalties for action on county property, as well as
lease revenues of $3,600 per acre.
The Wheeling Park Commission and city of Wheeling each gained $386,629
in lease payments from Chesapeake as part of the drilling contract for
the Oglebay Park land. Chesapeake also paid the park commission
$100,133 to lease property at Wheeling Park.
Potential Problems
With natural gas drilling proliferating throughout the Upper Ohio
Valley, especially in Marshall and Wetzel counties, there have been
plenty of concerns regarding explosions, fires, gas leaks and chemical
usage associated with Marcellus Shale activity.
In fact, it was an AB Resources well site about six miles outside
Moundsville's city limits that exploded on June 7.
The blast occurred when workers encountered a pocket of methane in an
abandoned coal mine. After injuring several workers, the charge ignited
a large fireball that burned for several days.
Following the explosion, officials with the West Virginia Department of
Environmental Protection's Office of Oil and Gas temporarily suspended
all AB Resources operations throughout the state. The office cited AB
Resources for failing to set casing at the permitted depth for the
site, and for inaccurately reporting coal seam depth.
Then in September, a Chesapeake gas well on Pleasants Ridge near
Cameron ignited. State environmental regulators cited the firm for
"failing to prevent the release of natural gas and the potential
pollution of waters of the state."
Jeremiah Magers previously reported that his water well near Cameron
became contaminated with methane - and that natural gas began bubbling
in Fish Creek - shortly after Chesapeake began its hydraulic fracturing
process at a production site roughly 1,200 feet from Magers' water
tank. Chesapeake officials previously confirmed the presence of methane
in the water, but denied their work caused the gas.
"Council is aware of the safety concerns," Hendershot said. "I think
they are comfortable with the situation."
Future
Hendershot said AB Resources has five years to begin drilling, or the
city will have the option to renegotiate for drilling on its land. He
said the city does not have any current plans to lease any other
property for drilling.
"We were contacted about some landfill property," Hendershot said, "but
we found out that we did not own the mineral rights."
Knowing that it is difficult to predict how the venture will ultimately
work out, Hendershot added, "Assuming council gives the go-ahead
Tuesday, we will find out over the next couple of years if this was a
good deal."