Industry reps provide public briefing on natural gas drilling and leasing
Natural gas industry representatives, accompanied by an accountant and an attorney, presented an information briefing to more than 70 members of the public at Marlinton town hall Monday evening.
Mike Ross of Mike Ross, Incorporated, Buckhannon, moderated the presentation and was assisted by R. Dennis Xander of Denex Petroleum Corporation, Buckhannon; Chad Perkins of BJ Services Company, Pittsburgh; Arden Swiger, natural gas utility owner, Beverly; Donald P. Nestor, CPA with Toothman Rice, Buckhannon and attorney Earl Maxwell of Dailey.
Leading off the presentation, Xander provided information on oil and gas leases, including definitions of lease terms; things to consider before signing a lease; who regulates drilling and operations of gas wells and whether or not a landowner should lease.
Xander explained that the "law of capture" applies to shallow wells in West Virginia. The law of capture decrees that the owner of the land where the gas comes out of the ground is the one who gets paid.
Under state law, a shallow well is not defined by depth, but rather, which rock strata the well penetrates. A shallow well is one that does not penetrate the top of the Onondaga limestone, while any well that penetrates the top of this formation is considered a deep well, he said.
A gas operator can drill a shallow well on one property, deplete the gas from an adjacent landowner's property and is not required to compensate the adjacent landowner. However, a gas operator cannot physically drill underground in areas that are not leased or owned, which would constitute a trespass, according to Xander.
He explained that the law of capture does not apply to deep wells. With deep well gas production, unitization, or "pooling," is available to adjacent landowners. Unitization is the pro rata sharing of proceeds from gas or oil wells among neighboring landowners. Unitization is available to landowners who have not sold or leased their mineral rights, via petition to the state.
The Marcellus shale lies above the Onondaga limestone and is therefore a "shallow" formation under state law. Gas operators are currently drilling the Marcellus shale in Upshur County using horizontal drilling techniques.
The experts downplayed water use with horizontal drilling and claimed that recent reports that millions of gallons could be required for horizontal drilling were false.
David Fleming asked the experts "what is this theoretical million gallons of water being used?"
Xander said that such claims are, "just stories in the newspaper."
When presented with information that an Upshur County well required over 550,000 gallons, Xander said, "well, what was presented in the paper was one to six million gallons, which is just way outlandish."
He added that his company had not done drilling in the Marcellus shale.
According to the New York Department of Environmental Conservation, one million gallons of water, or more, is used to drill and hydrofracture a typical horizontal well in that state.
The Pennsylvania Chapter of the Sierra Club reports that horizontal wells in that state "use 1 to 3 million gallons of water and .5 million pounds of sand. Large projects may require up to 5 million gallons of water."
Nestor presented additional lease advice and tax information. He advised lessors in a unitized pool to obtain additional compensation for loss of use of the surface if the well is drilled on their property. He also advised lessors to ensure there were provisions in the lease to cover damages to the surface.
Nestor informed the crowd that a tax deduction was available when receiving gas royalty payments. The tax deduction takes into account depletion of the natural resources on the lessor's property and should be claimed on the lessor's tax returns.
Perkins and Ross both discussed natural gas production practices, procedures and safeguards. They explained that, before a gas well is drilled to its full depth, a wider-bore hole is drilled and encased in cement to seal off and protect the water table. According to Perkins, the technique has been very successful in protecting groundwater in areas of gas drilling.