TOWANDA - The Towanda Municipal Authority has completed its purchase of a 23-acre property where it hopes to develop a municipal water well that could double the amount of water the authority can provide to the public, the chairman of the authority announced this week.

Towanda Municipal Authority Chairman Mike Walsh made the announcement at the authority's meeting on Monday, where authority Manager Kyle V. Lane also announced that the authority has entered into negotiations on an extension of its gas lease with Chief Oil & Gas.

Water source

The 23-acre property that the authority purchased is located at the east end of Campbell Road in North Towanda Township. The authority, which owns and operates the Towanda Water & Sewer Systems, purchased the property for $110,000 from Fred Roberts of Upper Black Eddy, Pa.

It's not known yet whether a treatment plant will need to be constructed for the water well, said James Pruyne, the solicitor for the authority.

The well on the Roberts property is needed to address the authority's growing municipal water system and would also serve as a back-up water source in case one of its existing water sources failed.

Authority Manager Kyle V. Lane said that he has been approached by Chief Oil & Gas, which is interested in extending its gas lease on the authority's 160-acre Satterlee Run property in Monroe Township for three years.

Chief has submitted a proposed lease for the Satterlee Run property, which would provide a signing bonus of $239,205, or $1,500 per acre, and a 15 percent royalty.

"I told (Chief's representative) that we were not hugely concerned about (the size of the signing) bonus but we wanted to have a bigger royalty," Lane said.

Chief's representative said he thought it would difficult to provide a higher royalty rate, but would ask his company if it would be possible, according to Lane.

The authority does not use the Satterlee Run property as a water source, although up until the mid-1980s it used a surface water source on the property, said Tom Fairchild Jr., a project manager with the TMA.

Besides the Satterlee Run property, Chief is interested in entering into a gas lease on the authority's 14-acre James Street property in the North Towanda area, Lane said. The authority's two existing municipal water wells are located on the James Street property, he said. However, Chief is more interested in extending its gas lease on the Satterlee Run parcel, Lane said.

Lane said he was told by Chief that the company is only extending leases on parcels that it plans to develop,

Lane said the authority's previous gas lease with Chief had recently expired.

"It expired at the end of September, I believe," Lane said.

Chief's previous lease, which was for five years, had provided the authority with a signing bonus of $2,500 per acre and a 15 percent royalty, he said.

In general, gas companies are offering signing bonuses that are "way down" from what they were in the past, Pruyne said.

The other water source used by the Towanda Municipal Authority (TMA) is Eilenberger Spring, located near Laddsburg. The entire 25-acre, TMA-owned property where Eilenberger Spring is located is included in a production unit for Chief's Curtin gas well, Lane said on Tuesday.

Last month, the TMA received its first royalty check for gas being drawn from beneath the Eilenberger Spring property, Lane said.

Under Chief's gas lease, the company is barred from drilling gas wells on the Eilenberger Spring property itself, Lane said.

The well pad of the Curtin well is located approximately 4,500 feet - or .85 miles - from Eilenberger Spring, Lane said.

If the authority and Chief were to enter into a gas lease on the James Street property, the lease would not allow gas wells to be drilled on the James Street property, Lane said.

To protect municipal water sources, such as a water well or a spring, the state requires that gas wells cannot be drilled within a certain distance from those water supplies, state Rep. Tina Pickett said in an interview.

Pruyne said he will now review Chief's proposed lease on the Satterlee Run property.

Lane said he has not yet heard back from Chief on whether it would provide a higher royalty rate.

Chief has not yet provided a proposed lease for the James Street property, Lane said.

James Loewenstein can be reached at (570) 265-1633; or email: jloewenstein@thedailyreview.com.