It's All Part of the Drill:
Natural gas drilling has been a boom for some, a bust for others

Washington, PA Observer-Reporter
16 November 2008
By Michael Jones, Staff writer

The natural gas drilling boom in Western Pennsylvania has been a financial blessing for area residents and, at times, overwhelming.

The Marcellus shale formation, a deep pocket containing an enormous amount of untapped natural gas more than a mile underneath this region, has triggered drilling companies from as far away as Texas to swarm this region with rigs and workers.

Some land owners here have benefited greatly from lucrative gas royalties while other have been saddled with some of the side effects as Washington County becomes the epicenter of the Marcellus.

Geologists for years have known about the formation, which extends from southern West Virginia to New York, but only recently have they gained the technological ability through horizontal drilling to tap its recourses. Range Resources, Chesapeake Energy, CNX Gas and Atlas Energy Resources are now major players in the region.

The uptick in natural gas prices last year fueled the boom in this area, and some property owners are receiving thousands of dollars per acre to lease their land to the drilling companies. Not everyone is happy, and some are expressing concerns about how the drilling is affecting the environment or their rural lifestyle.

Dirty business

Drilling is a dirty business, as the natural gas companies acknowledge.

The companies spend several weeks drilling more than a mile below the surface, then turn the bit and drill horizontally when it reaches the shale. A massive amount of water is used in the process, prompting companies to transport it, pipe it or build impoundments to store it.

Once the drilling is completed, the well is fractured using a mixture of water, sand and lubricants that are blasted into the hole. That process creates fractures in the shale, allowing the natural gas to escape the formation and rise to the surface, where it is captured and piped to a processing plant.

The large tankers used to transport equipment or water have crushed some local roads. Mt. Pleasant Township endured problems early last year, although Range eventually fixed the broken roads without using tax money.

The continuous drilling over several days also has been a nuisance for nearby residents, but it is necessary that the drill bit plows ahead to keep the expensive horizontal drilling process moving forward.

"We want to communicate with people in the future about what is happening," Range spokesman Matt Pitzarella said. "We are deeply apologetic if we have made it difficult for anyone in the past. But I think it's important that a year later (the townships) have new roads. That's the real win-win for everyone."

But Mt. Pleasant resident Ron Gulla is far from satisfied.

He agreed to lease his property off McCarrell Road, where Range constructed four wells in 2005. Gulla said problems developed during drilling and claimed it ruined his land, well water and fish pond.

"They're not worried about environmental impact taking place. These people don't have a clue," Gulla said. "Would I ever do it again? Never. I've had every problem you can think of."

Environmentalists are studying whether the chemicals used in the fracturing contaminate ground water. Range said it uses multiple steel and concrete casings around the hole to protect the water table.

Pitzarella said they have attempted to compensate Gulla, but have been unable to reach an agreement. He added that Gulla's experience has been rare since Range entered the area four years ago.

"Mistakes have been made in the past because it's all so new in this area," Pitzarella said. "What we've tried to do is improve upon those mistakes and not make them twice. We're very upfront with folks. It's a very dirty process and lasts a few weeks. Property will be restored better than before we got there."

The experience of the Curran family just a few miles away on Caldwell Road has been mostly positive. Range drilled three wells on the 140-acre farm where Marjorie Curran lives.

She and her late husband, Cornelius, were compensated for crops destroyed in the process, and Range sends monthly royalty checks to the home. The household also receives free natural gas as long as the wells produce, and Range has promptly responded to most of their complaints.

In an interview with the Observer-Reporter this year before his death in August, Cornelius Curran suggested anyone considering leasing their property should consult a professional geologist.

"It's been a good experience considering we get royalties," Curran said. "The damage they have done has been minimal. We have personal contact with their employees, so we have a pretty good, close relationship."

Newfound wealth

Helen George's drilling lease is one of the more dramatic examples of how the rising price for natural gas in recent years has altered economic fortunes. George, who owns 32 acres in Amwell Township, was approached by several companies before signing a five-year lease for her land in June 2006. She received a signing bonus of $45 per acre and 13 percent royalty share.

She expressed satisfaction with the lease until the same drilling company mistakenly approached her again in September because her maiden name is on the land deed. They offered her a more lucrative deal of $3,500 per acre for the land and 17 percent of the royalties.

Realizing it already controlled her land, the company rescinded the offer. However, George is not upset that she missed out on a larger profit. She understands the economic shift and insists she will renegotiate the lease if the company does not drill before the lease expires.

What concerns George is that the instant wealth is haunting some of her neighbors in the quiet farming community.

"Sure, I could use the money, but it's the idea that it's not fair," George said. "It's causing greed and breaking up families."

Pitzarella said the royalty payments are somewhat akin to winning the lottery and suggested property owners receive financial consultation to help them deal with the newfound wealth. He attributed price swings to land location, increased competition and market demands.

In fact, the national credit crisis and recent dip in natural gas prices appears to already be putting a dent in lease values, although Range executives said they are committed to continue development in this area.

Some residents living near the drilling rigs are left out of the jackpot, however, because they do not own the mineral rights below their property. They are compensated for the work done on their land, but are not entitled to the profits that accompany the royalties.

"You can try to hold it up in court and the gas companies might try to work with you, but there's very little you can do if you don't own the mineral rights," said Jason Mendicino, who operates a company that bundles land owners together to maximize bargaining power. "Our ancestors may have sold that off years ago figuring they could never access it themselves."

State Rep. Jesse White, D-Cecil, has heard complaints from people who do not own the mineral rights and is working on legislation that may give them more power.

While it might be a long shot, the bill would give people who do not own the mineral rights an opportunity to claim them if they have been unused for 10 years or longer. A landowner would be allowed to petition the court for the rights if there are no plans to drill and the previous owner does not claim them.

"It wouldn't always be a slam dunk for the homeowner," White said. "But, in some instances, they would be able to get those rights whereas now they have no way."

Regardless of who is receiving signing bonuses or monthly royalty checks, the region is likely to benefit for years from the natural gas boom. Range Chief Executive John Pinkerton and other natural gas experts predict that Pennsylvania could one day become a major exporter of natural gas.

"The Marcellus has incredible potential," Pinkerton said in a September interview with the Observer-Reporter. "Pennsylvania could be the OPEC of gas in the U.S."

Copyright Observer Publishing Co.